We close it, open it, then close it and open it again… Make no mistake, it’s not a swing door in question, but a mortgage.
Who has not thought one day of making changes before the deadline? Well Named ! Life being strewn with unforeseen events, divorce, job loss, urgent renovations… it is completely legitimate to review or, at the very least, to question the commitments made with your financial institution.
The vagaries of the economy strewn with ups and downs can also be at the origin of this questioning. The trigger, a sudden drop in the interest rate. So why not enjoy it ?
Regardless of the reasons, the first step to take is to contact the advisor at the financial institution or your mortgage broker to find out about the terms of an early renewal. You will be offered several options.
Renewal
Most institutions will agree to renew the mortgage between four and six months before maturity, free of charge. However, beyond this horizon, you risk having to pay a penalty. This will vary between institutions, but in general, the longer the maturity of the mortgage, the higher the penalty will be. That said, the institution’s adviser will give you the facts.
The renewal will allow you to choose the current interest rate and modify the term of the loan. It is up to you to assess whether the operation is profitable.
Refinancing
Unlike renewal, mortgage refinancing allows you to renegotiate the amount of the loan and thus take advantage of the accumulated equity to do something else with the money thus released. Because over the years, the market value of the house has increased, following the market price. The financial institution will likely require a new appraisal to update this value. In addition to the costs of an appraiser, you will have to go back to the notary. Thus, the bill becomes heavier: appraisal fees, notary fees, not to mention that the financial institution will add its two cents, prepayment fees to compensate itself (if applicable). Finally, do not forget that we are in a period of rising interest rates. Renew the mortgage, of course, but at what rate?
But the operation may still be suitable for you. In the game of pluses and minuses, we win and we lose. It is enough that the balance is positive, allowing you to achieve your goals by having your equity now available. So, play the calculator!
Home equity line of credit
What is it about ? The mortgage payment you regularly make consists of two parts: interest and principal. Over time, you have repaid a portion of the capital you originally borrowed. Part of it can be the subject of a home equity line of credit. The beauty of the thing is that this sum is available immediately. No notary fees or surveying, nothing. Interesting, no!
In conclusion
It is beneficial to revisit the commitments that we make in the long term according to events that occur in our lives or according to changes in the economy.
Advisors from financial institutions or your mortgage broker are there to guide you. Do not hesitate to use their advice and knowledge. It’s free.
