Mortgage Renewal Tip

Mortgage Renewal Tip to Lower Monthly Payments

The Bank of Canada has raised interest rates a few times this year. The knee-jerk reaction of the major mortgage lenders has been to raise mortgage rates. As mortgage rates go up, money that was increasing your home equity every month is now redirected to the bank’s vaults.

With every mortgage rate increase, a massive transfer of wealth from homeowners to banks is underway. We are certain of that because the money that was flowing into your pocket every month now goes to the bank.

One way to lower your monthly payments at renewal is to ask the bank to re-amortize your mortgage.

Amortize is what banks call the amount of time it will take for you to pay off your mortgage. Chances are good; you started at 25 years. If it’s been five years and you are up for renewal, the bank will offer you new terms and interest rates for the remaining 20 years. 

Re-Amortize means stretching the mortgage back out to 25 years or longer. A lower outstanding balance with a longer repayment period equals lower payments.

Banks do not offer this – you have to ask for it. And keep asking if the person you talk to has no idea what you’re talking about.

You get lower monthly payments that you might need right now. You can always increase payments to offset the longer term you decide to take.

Crunch the numbers or talk to me. I’ll help you. I re-amortized a mortgage on an investment property to increase my monthly cash flow right before covid hit. That extra cushion came in very handy for my tenants and me. 

You can also re-amortize in the opposite direction when interest rates drop, and you want to pay off the mortgage quicker.

Do as much of your own homework on mortgages as you can. Unfortunately, the way the mortgage industry is structured, a mortgage agent isn’t always acting in your best interests. I can recommend some good ones for you, though.