Attention Existing Homeowners! – Should I Renew, Refinance, or Transfer?

As an existing homeowner, your mortgage renewal is a crucial moment that demands careful consideration. With changing economic landscapes, increased property values, and evolving interest rates, it’s essential to explore all available options. In this blog post, we’ll delve into the definitions and benefits of renewing, transferring, and refinancing, providing you with valuable insights to make an informed decision.

Renew:

Mortgage renewal often seems like the default option, but it’s crucial to understand that it may not always be the best one. Your decision should depend on the term and rates your bank offers. In some cases, sticking with the same lender may not provide you with the most competitive terms. It’s essential to shop around, compare rates, and explore all options available to secure the best deal for your specific financial situation.

Transfer:

Transferring your mortgage involves moving it from one lender to another. This option typically results in no change to your mortgage balance, and if you were previously insured, you may not need to undergo a stress test again. The amortization remains the same, offering stability in your repayment plan. Additionally, with property values on the rise, you may be able to take advantage of better pricing based on the increased value of your home. Most transfer options come at no cost to you as the lender will pick up any expenses associated with the transfer.

Refinance:

Refinancing your mortgage can be a strategic move, especially in a market where property values have seen significant increases. By tapping into the equity gained from your home’s appreciation, you have the option to lower your monthly payments by extending the amortization period. This can provide relief and flexibility in your budget. Moreover, refinancing allows you to pay off high-interest consumer debts such as credit cards, lines of credit, or auto loans, consolidating them into your mortgage at a potentially lower interest rate. If you are concerned about your budget based on the payment on your banks renewal offer, refinancing may be your best option.

Key Statistics:

To put the current Ottawa market into perspective, consider the following statistics:

Home Values have Increased:

Average Single Family House prices at the end of 2019: $500,306

Average Single Family House prices at the end of 2023: $761,209

Interest Rate have Changed:

Bank of Canada Rate: Increased from 2% in 2019 to over 5%

Prime Rate: Increased from 3.95% in 2019 to 7.2%

5-Year Fixed Rates: Increased from 3.14% in 2019 to 5.24%

Exploring Your Options:

Given the significant changes in property values and interest rates, it’s essential to explore your options thoroughly. That is where we come in! A mortgage professional can assist you in understanding the nuances of each choice and help you make an informed decision based on your financial goals and circumstances.

If you’re leaning towards renewal, carefully review the terms offered by your current lender and compare them with other options in the market. A slight difference in interest rates can have a substantial impact on your overall mortgage costs.

If transferring your mortgage to a new lender seems appealing, consider the stability it offers with the unchanged balance and amortization. Don’t forget to leverage the potential benefits of increased property values, which may result in better pricing.

For those considering refinancing, take advantage of your home’s appreciation by potentially lowering your monthly payments and consolidating high-interest debts. A mortgage professional can help you navigate the process and ensure you understand the long-term implications.

If your mortgage is coming up for renewal in 2024 please reach out to any of our agents at The Mortgage Advisors to review all your options and make the right decision!