Of Prime Interest: Mortgage renewal is a time to assess your finances

Plenty can change in someone’s life in a year, never mind over the course of a five-year mortgage.

  • Jul. 6, 2016 9:00 a.m.

A career change, kids, retirement or newfound money are the kind of events that can change your life, and impact on the type of mortgage that will be best suit your financial situation moving forward.

While many us would prefer avoiding such a task, doing an annual financial check-up is a smart thing to do.

We often just wait for a renewal letter before looking at our mortgage, and even then we are likely send the contract back without assessing if it really meets our current needs or situation, in part because we often feel changing mortgage lenders or the mortgage terms is futile.

We tend to become complacent about our mortgage payments and we could be saving a lot of money with a change.

Mortgage interest rates are an obvious thing to pay attention to—the more adverse you become to risk, the less likely a variable mortgage will be right for you. If the rates are going up at renewal time, think about how a higher mortgage payment fits into your financial situation, or if you should switch from a variable to fixed rate. And if mortgage rates are dropping, you might want to refinance or renew early.

Even though banks are in the business of generating as much interest payment income from you as possible, many will allow people to pay a lump sum of the principal on the mortgage’s anniversary and increase  monthly payments.

An extra $100 a month on a standard $200,000 mortgage could save almost $18,000 in interest and shorten the amortization period by about four years.

Even something simple such as making renovations could affect the type of mortgage desired.

For example, topping up or refinancing an existing mortgage can pay for renovations, providing you’re comfortable with a blended interest rate or paying the penalty to secure a lower rate.

Maybe you just want to consolidate higher-interest unsecured debt into your mortgage. Rolling that into your mortgage can significantly save on interest costs and that will help you get out of debt sooner

A mortgage can also help you become more tax efficient if you’re thinking of investing in a business, buying a rental property or putting some money into mutual funds or the stock market. That’s because the interest paid on money borrowed on a principal property can be written off against revenue from those investments.

Making changes to your mortgage before you go into a new venture or before you retire would allow you to qualify much easier rather than waiting for your mortgage to come up for renewal.

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