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September 16 2022 | Mortgage Watch

How to Reduce the Shock at Mortgage Renewal Time

How is everyone doing…for real? With inflation on the rise, interest rates soaring, and life getting busier by the day, I’m sure everyone is feeling overwhelmed. In today’s blog, I want to talk a little bit about mortgages and what we need educate ourselves on due to the current state of our real estate market.

If you have a variable mortgage, the last couple of months has likely been stressful. You have also likely heard the term “trigger point” and if you haven’t, you should know what it is. It’s the point in which variable-rate mortgage holders with “fixed payments” are no longer making payments towards the principal (the amount owing) and now paying 100% towards interest only. If you are in this situation and affected, your lender will most likely reach out to you to up your monthly payments.

As the payment towards the principal decreases, the time to payback the mortgage will increase (amortization period) for people with a variable mortgage with fixed payments. Fast forward to renewal time, this is when the real shock will set in. You may have to renew at a higher rate, with higher payments to allow the amortization period (pay back period) to get back to the number of years permitted.

If you would like to reduce that future shock, consider calling your mortgage company and increasing your mortgage payment in advance which will soften the blow at renewal time. If you would like some advice on mortgage options, please feel free to reach out to our team mortgage broker, Arlene Karram.

If you choose to make payments over and above your current payment plan, they will go directly towards the balance and can potentially take years off your amortization. You should always consider your options, ask questions and keep yourself educated when it comes to not only the real estate market, but the mortgage options as well!

That is all for now, keep your head in the game and don’t panic. We are here for any questions that you have.