Imagine that, a few years from now, the time has come to renew your mortgage.
Several years back, you got a $350,000 at the then great rate of 2.24%. Your mortgage payments are $1522 per month.
Because we are now in what the financial brainboxes call “ an escalating rate environment “ – normal people just say rates are going up – when you open your renewal notice you might encounter the same feeling you get when you look at the price of a car you like.
When you actually do look at the renewal notice, you see that the remaining balance on your mortgage is now $294,662, the new ( very competitive rate ) is 3.25% and that the new payment is $1668, actually $150 dollars a month MORE than you were paying previously. You think “WHAT THE….???”
This type of sticker shock is a new sensation to an entire generation of Canadians. Brokers are fond of talking about the fact that rates had not moved in 7 years but we rarely talk about the fact that rates have been trending down for more than twenty years and chances are, if you’ve had a mortgage for any time during that period, the payment at renewal has always been lower than when you started out.
‘Well, what’s to be done’, you ask? ‘How do I avoid “sticker shock”?
The key to avoiding that sinking feeling is to increase your payment slightly every year. You can find out how much to increase it during your Annual Mortgage Review. By increasing your monthly payment by even 2% a month, you can potentially avoid that sinking feeling – and pay off your mortgage even faster!
But wait; “Annual Mortgage Review? Qu’est-ce que c’est”, you ask.
An annual mortgage review, done with either your mortgage provider’s representative or your own mortgage representative ( i.e. your friendly Mortgage Professional) is just a quick check up to discuss what the current balance is, how things are going and do a quick review of your early payment privileges, increased payment privileges and potential prepayment privileges.
Its best to have these annually because , well, the average human needs to be shown the same information seven times to learn it – save time and start today. If you have any questions, please contact your local Dominion Lending Centres mortgage specialist.
Written by Jonathan Barlow