April 15, 2016

Managing your most important debt

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Renegotiating, refinancing or moving your mortgage can really pay off

With today’s busy real-estate market, many of us are about to get a new mortgage or have an existing mortgage coming up for renewal. Either way, managing your mortgage the right way can provide you with substantial interest savings and over-all financial planning benefits. Here are some important things to consider.

Renewing your mortgage

Because of the strong market in 2011, many people are renewing five-year term mortgages in 2016. Most banks offer an early renewal option.

In most cases, you can take advantage of a 120-day early renewal option, which allows you to renew early without any penalties, although some restrictions may apply. This could save you interest costs if rates rise before your regular renewal date.

Seek the advice of your mortgage expert to choose a new term that is right for your finances.

Should I renegotiate my mortgage term before renewal time? 

Before you renegotiate your current mortgage to take advantage of lower interest rates, there are several things to keep in mind, the most important of which is how much it will cost to break your mortgage.

Mortgage pre-payment charges are collected from you to partially offset the costs that your financial institution is charged. The best way to know whether you will save money in the long run is to speak to your mortgage specialist.

Refinancing your mortgage

There is no limit on how many times you can refinance your property; however, you must qualify each time you apply.

If you need access to additional funds, using the equity in your home can be a lower-cost way to borrow money rather than taking out a traditional loan. You can take advantage of the equity in your home to purchase another property, make an investment, undertake a substantial renovation, finance your children’s education or consolidate higher-interest-rate debt.

Porting your mortgage to a new home

Thinking of selling your home and buying a new one? The mortgage portability option lets you transfer the terms and conditions of your current mortgage to your new home. If needed, you can also add additional funds to your mortgage at this time.

Can the person buying my home take over my mortgage? 

If your mortgage is assumable, a home buyer can take over your mortgage if they qualify. If your current mortgage is a low-interest, longer-term mortgage, offering a potential purchaser the opportunity to assume your mortgage may be a great strategy, especially when mortgage rates are rising.

Kevin Lutz is RBC Regional Sales Manager,
Residential Mortgages
 @RBCKevinLutz

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