To start, let us clarify what an amortization period is. It represents the duration it takes to fully pay off your mortgage through regular payments. An amortization extension, on the other hand, refers to any period beyond your initially qualified amortization.

Which lenders and banks offer amortization extensions?

Prime lenders, who are federally regulated, typically do not offer amortization extensions beyond 30 years. However, if your current mortgage has a shorter amortization period (i.e.: 20 years), you can extend it when refinancing with them. Alternative mortgage lenders, often referred to as “non-bank” lenders, may offer extensions of 35 to 40 years, provided you have at least a 20% down payment or more than 20% equity built up.

Who can extend their mortgage and why?

First-time home buyers are typically limited to a maximum amortization period of 25 to 30 years. Most put less than 20% down needing default mortgage insurance that restricts amortization to a maximum of 25 years. However, if they have 20% or more to put down, they can extend the amortization beyond 25 years.

In contrast, renewers may have the option to extend their amortization at the time of renewal. For example, they can go from 20 years back to 25 years or from 25 years back to 30 years to lower their monthly payments. Keep in mind that these options vary based on individual situations.

It is important to understand that extending your mortgage amortization outside of renewal would require refinancing, which may incur penalties and necessitate requalification at current rates. Nevertheless, refinancing can be a viable solution in certain circumstances. To explore your options fully, I recommend discussing your specific needs with me.

For example…

Imagine a young couple bought their first home 5 years ago with a $750,000 mortgage at 3.5% interest. They initially chose a 25-year amortization, making a monthly payment of $3,745. Now, at renewal, their balance is $635,000 with rates at 5.39%. They’re considering extending their amortization to keep their monthly payment the same. Let’s compare the numbers:

The rates shown are for illustration purposes only and subprime lenders’ rates over 30 years amortization may differ.

Extending your mortgage amortization can be an effective financial strategy, but as with any important financial decision, it is essential to weigh the risks and benefits carefully. If you have any questions or would like to explore your options further, please reach out to me.

Is your mortgage coming up for renewal? Do you know about all the incredible options renewing your mortgage can afford you? If not, we have all the details here on how to make your mortgage renewal work for you as we start to think about 2024.

Get a Better Rate

Are you aware that when you receive notice that your mortgage is coming up for renewal, this is the best time to shop around for a more favourable interest rate? At renewal time, it is easy to shop around or switch lenders for a preferable interest rate as it doesn’t break your mortgage. With interest rates expected to come down as we move into the New Year, taking some time to reach out to me and shopping the market could help save you money!

Consolidate Debt

Renewal time is also a great time to take a look at your existing debt and determine whether or not you want to consolidate it onto your mortgage. For some, this means consolidating your holiday credit card debt into your mortgage, for others it could be car loans, education, etc. Regardless of the type of debt, consolidating into your mortgage allows for one easy payment instead of juggling multiple loans. Plus, in most cases, the interest rate on your mortgage is less than you would be charged with credit card companies.

Start on that Reno

Do you have projects around the house you’ve been dying to get started on? Renewal time is a great opportunity for you to look at utilizing some of your home equity to help with home renovations so you can finally have that dream kitchen, updated bathroom, OR you can even utilize it to purchase a vacation property!

Change Your Mortgage Product

Are you not happy with your existing mortgage product? Perhaps you’re finding that your variable-rate or adjustable-rate mortgages are fluctuating too much and you want to lock in! Alternatively, maybe you want to switch to variable as interest rates start to level out. You can also utilize your renewal time to take advantage of a different payment or amortization schedule to help pay off your mortgage faster!

Change Your Lender

Not happy with your current lender? Perhaps a different bank has a lower rate or a mortgage product with terms that better suit your needs. A mortgage renewal is a great time to switch to a different bank or credit union to ensure that you are getting the value you want out of your mortgage if you are finding that your needs are not currently being met.

Regardless of how you feel about your current mortgage and what changes you may want to make, if your mortgage is coming up for renewal or is ready for renewal, please don’t hesitate to reach out to a DLC Mortgage Expert today! We’d be happy to discuss your situation and review any changes that would be beneficial for you to reach your goals; from shopping for new rates or utilizing that equity! Plus, we can help you find the best option for where you are at in your life now and help you to ensure future financial success.

While not the only factor to look at when choosing a mortgage, interest rates continue to be one of the more prominent decision criteria with any mortgage product. Understanding how mortgage rates are determined and the differences between your typical fixed-rate and variable-rate options can help you make the best decision to suit your needs.

HOW RATES ARE DETERMINED

The  chartered  banks  set  the  prime-lending  rate  (the  rate  they  offer  their best customers). They base their decisions on the Bank of Canada’s overnight rate, because that’s the rate that influences their own borrowing. Approximately  eight  times  per  year,  the  Bank  of  Canada  makes  rate announcements that could affect your mortgage as variable  mortgage  rates  and  lines  of  credit  move  in  conjunction with the prime-lending rate. When it comes to fixed-rate mortgages, banks  use  Government  of  Canada  bonds. In the bond market, interest rates can fluctuate more often and can provide clues on where fixed mortgage rates will go next.

To put it simply: a variable-rate is based off of the current Prime Rate, and can fluctuate depending on the markets. A fixed-rate is typically tied to the world economy where the variable rate is linked to the Canadian economy. When the economy is stable, variable rates will remain low to stimulate buying.

FIXED-RATE VS. VARIABLE-RATE

Fixed-Rate Mortgage

First-time homebuyers and experienced homebuyers typically love the stability of a fixed rate when just entering the mortgage space.

The pros of this type of mortgage are that your payments don’t change throughout the life of the term. However, should the Prime Rate drop, you won’t be able to take advantage of potential interest savings.

Variable-Rate Mortgage

As mentioned, variable-rate mortgages are based on the Prime Rate in Canada. This means that the amount of interest you pay on your mortgage could go up or down, depending on the Prime. When considering a variable-rate mortgage, some individuals will set standard payments (based on the same mortgage at a fixed-rate). This means that, should Prime drop and interest rates lower, they would end up paying more to the principal as opposed to paying interest.

If the rates go up, they simply pay more interest instead of direct to the principal loan.

Other variable-rate mortgage holders will simply allow their payments to drop with Prime Rate decreases, or increase should the rate go up. Depending on your income and financial stability, this could be a great option to take advantage of market fluctuations.

Want to learn more about rates or need mortgage advice? Contact me today!

Although credit cards interest rates have not been affected by the recent surge in the prime lending rate, the fact remains that credit card debt is usually the most expensive debt you can have. The average is around 20% and even the so-called ‘low interest’ cards carry a rate in excess of 10%. Expediting the demise of your credit card balance should be the number one focus for anyone looking to improve their financial situation. Here are five actions to get you started.

1. If you are carrying a balance, the first step is to put the card(s) away. Whether you put them in the food processor or just temporarily turn them off (our recommendation), you need to own up to your mistake and not add any more fuel to the fire. If it’s the case where you have no choice but to use the card (a prepayment for example) make sure to make a payment to cover that charge right away.

2. Take a minute to fully understand the consequences of a credit card balance. Search out the details of your credit card statement until your find the section that tells you exactly how many years it will take to eliminate that balance with minimum payments. While you are at it, make sure to confirm the interest charge for that month and just how little of your payment is actually going toward reducing the balance. It can be a bit shocking, but also quite motivating! The government has a simple online calculator for you to easily analyze different repayment options.

3. Plan your repayment attack. Making a few random spending sacrifices and hoping that you will have a little more left at the end of the month to pay towards your card is wishful thinking. You need to figure out ASAP the maximum amount you can throw at your credit card debt every month and chart out when you are going to be debt-free. Set up an automatic transfer from your bank account to your card every payday and make that money invisible – you can’t spend what you can’t see!

4. Investigate balance-transfer credit card options… but only if you have a plan and are confident you can pay off the balance within the prescribed period! A balance transfer card shifts your debt to a new card (for little or no fee) which offers a limited time period (usually 6 -12 months) with a very low interest rate (often 0%) to pay off the balance. This cuts your interest expense to zero and ensures that 100% of your payment goes to reducing the balance. However, you have to be very disciplined and have the income to make regular payments. The card company is literally banking on you to fail and hopes you will miss the payment deadline, because that will trigger an avalanche of penalties, fees and interest charges that will put you worse off than ever!

5. Pick up the phone and call your card company. It might be more possible and easier than you think to actually negotiate a lower interest rate on your credit card. If you have had a card for a while and have been carrying a balance and making the minimum payments, you are a valued customer! Your card issuer is very interested in keeping your business and may be willing to negotiate. You will have to get through to the right people and know what to say, but 15 or 20 minutes on the phone could save you a chunk of cash – even a few percentage points would help.

The above tips will help you get started on the road to eliminating your credit card balance. There are no shortcuts and it may require a lot of sacrifice depending on how much debt you have, but the mental burden that lifts when you see a big zero under “balance due” it will be worth it!