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Don’t Fall For Low Fixed Rates

The fixed rate versus variable rate debate has never been more heated. With fixed rates currently averaging historical lows of roughly 2.25%, a lot of people are left wondering, “why wouldn’t I choose a fixed rate mortgage?” Fair enough – it certainly appears to be a safe bet on the surface. Lock in a low rate. Maintain it for the entirety of your term. Never worry about rates going up.

This belief is fuelled by the big banks spreading hysteria that variable rates are sure to shoot up. Why risk it when you can go with a record low fixed rate? Here’s the truth: The banks are pushing 5-year fixed rate mortgages because they’re more profitable for them. A variable rate mortgage isn’t the gamble it’s made out to be. In fact, it’s by far the more prudent move. 

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Despite Uncertainty, Canadians Are Keeping Up With Mortgage Payments

You might have heard some sensationalist news stories over the past year about Canadian homeowners over-borrowing. With the employment rate so low, and mortgage debt so high, how could Canadians possibly keep up with their payments? Headlines spewed dire warnings that once payment deferrals expired, borrowers would default in droves. 

Except that isn’t what happened at all. 

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Will I Be Offered a Mortgage Renewal?

If you’re nearing the end of your term, you might be wondering if your lender will offer you a mortgage renewal. Mortgage renewals are a great way to reassess your needs and potentially even get a better rate than the one you have now. But not getting a mortgage renewal means you have to pay your balance in full – so it’s no wonder so many feel anxious towards the end of their term. Inflammatory headlines about the dangers of mortgage renewals floating around the internet certainly don’t help either. 

The good news is you can relax. In Canada, you’re guaranteed a renewal offer from your lender provided you pay your bills on time and don’t have any outstanding balances with Revenue Canada. As long as you’re borrowing from a reputable financial institution, you should be in the clear. 

Where it gets tricky is when you borrow from a private lender. Private lenders aren’t federally regulated, so they have no obligation to offer you a renewal. However, for the vast majority of Canadian borrowers, a renewal offer is guaranteed.

A Bit of Background

There was a time when feeling antsy about your upcoming renewal was actually founded. In 2012, the Office of Superintendent of Financial Services (OSFI) almost made it mandatory for mortgage renewals to be re-underwritten. Thankfully, after some deliberation, they decided against it. The renewal process remains tipped in favour of borrowers.

The Bottom Line

The end of your mortgage term shouldn’t be fraught with uncertainty. If you’re borrowing from one of the banks, rest assured you’ll be offered a mortgage renewal. But don’t take whatever deal they throw at you. Use the opportunity to explore your options and make sure you’re getting the best mortgage product for you.

To do that, you should always consult a mortgage broker. Brokers don’t work for any one bank or credit union. They’re completely impartial experts acting purely in your best interest. Plus, they have access to wholesale pricing on mortgage products that the average person doesn’t. It’s that simple. If you’re not sure where to start, feel free to call my office any time. Just make sure you don’t miss the opportunity of a mortgage renewal to get the best deal possible.

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.ca

The Bank of Canada’s Growth Forecast: What It Means For Homeowners

Last month, the Bank of Canada released their Monetary Policy Report – or in plain English, their economic forecast. It’s a document that lays out their predictions for the future of the Canadian economy including GDP growth and inflation rates. Of course, there’s a lot of interesting information here. But if you’re a homeowner that carries a variable rate mortgage, you might be concerned mostly with their inflation projections. Why? Inflation typically impacts interest rate movements. 

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Rethinking Your Career? Here’s How It Could Affect Your Mortgage

The pandemic has forced a lot of people to look at their careers more critically. Is my job fulfilling? Does it afford me work/life balance? Flexible hours? Decent time off? Now, with so much uncertainty behind us, people are finding the courage to make a change as part of a trend that many are calling “The Great Resignation.”

You might just want to start working at another company. Or start a business. Or, just take some time off. Whichever direction you decide to take, it’s important to understand how it could affect your mortgage.

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