Get a mortgage rate hold to avail of today's lower rate if rates increase

Lower mortgage rates

It’s no secret the mortgage market is constantly fluctuating—rates go up and down and make it difficult to predict the best time to buy a house or secure the rate for your mortgage renewal or refinancing.

These past few weeks we have seen some lenders cut their fixed-term mortgage rates as the bond market declines, but they were not the big banks. Hopefully we will see some movement from them by the spring should rates keep declining.

The bond market has a direct effect on fixed-term mortgage rates in Canada along with a few other factors. When bond yields rise, it means investors are demanding a higher return on their investments, which in turn pushes up the cost of funds for lenders. As a result, lenders must increase their mortgage rates to cover the increased cost of borrowing. Similarly, when bond yields fall, the cost of funds for lenders declines, which allows them to offer lower mortgage rates to borrowers.

With the current market conditions, it is especially important to consider securing a mortgage rate hold when rates are declining, which they are doing right now.

A mortgage rate hold is essentially a guarantee from a lender that it will not raise the rate on your mortgage, regardless of what happens to interest rates in the market. That means even if interest rates go up, you can still get your mortgage at the same rate you were promised when you first applied. For those looking to buy a home, getting a mortgage rate hold during times of declining rates can be an extremely valuable tool. It can give you peace of mind, knowing you won’t be affected by any changes in the market with rising rates.

As mentioned in a previous column, many banks are contacting their mortgage clients well in advance of the renewal date to offer early renewals. No doubt you will be facing a much higher interest regardless, so an early renewal offer might be tempting to consider. You may no doubt have concerns that interest rates may be higher if you wait until your renewal date. However, renewing your mortgage early can actually be a costly decision.

Interest rates are constantly fluctuating, and if you renew your mortgage early and rates go down, you could end up paying more for your mortgage in the long run and lose the current lower rate you have on your mortgage immediately as the lender will not hold the new rate until your renewal date. As a mortgage broker, I can hold the new lower rate until your mortgage renewal date within a certain window.

If you are purchasing a new home or your mortgage is due for renewal between now and March next year, you should take advantage of today’s lower mortgage rates by securing a rate hold along with a mortgage “pre-approval.”

No one knows how long these lower rates will be available as, at some point, the bond market will settle back to its long-term average and rates will start to increase again. Right now there is a window of opportunity.

As a mortgage broker I can hold rates for up to 120 days and if rates go lower, we can adjust accordingly to ensure you receive the lowest rate available for your situation.

Please reach out if you would like to discuss your current mortgage renewal or if you are considering purchasing a home next year and need a pre-approval. You can also book a time for a chat here on my calendar.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Put your home equity to use

Home equity opportunities

Your home value may have increased significantly since you purchased your home, particularly if you bought prior to 2020.

Homes are worth more and therefore net worth has increased, meaning you now have more home equity available to possibly access.

What is home equity? It is the difference between the value of your home and how much you owe on the mortgage. If qualified, you can borrow up to 80% of your home’s appraised lending value.

What can you use home equity for? You can use your home equity really for whatever purpose you want but here are a few of the most common requests that I am seeing lately.

Investing in real estate

Many are now recognizing the opportunities that are available to invest in real estate to build wealth. Some are first time rental property buyers who are looking to build an investment property portfolio over the years but many are closer to retirement and are purchasing a property now to rent out while looking towards that becoming their primary residence down the road. Real estate can be a great investment to add to your portfolio for long term investment and to create income. Utilizing the existing equity in your primary residence could be the way to get started building your portfolio.

Home renovations

With the current lack of inventory many are now looking to renovate and upgrade their current homes rather than moving. Some are adding secondary suites in their homes as a mortgage helper. This can be accomplished by either setting up a home equity line of credit or a totally new mortgage. A full financial review with a mortgage broker is the first step to determine which option is best.

Buying a vacation property

Many dream of a family vacation property. By accessing your home equity you can obtain funds for the down payment on a vacation property.

Consolidating high interest debt

With rising interest rates and the high cost of living, now might be a great time to take a look at eliminating high interest credit card debt, unsecured lines of credit or auto loans. There are many benefits to a refinance for debt consolidation including the following:

• A much lower monthly interest rate for all of your debts

• Lower monthly payments by either securing a lower mortgage rate or by extending the mortgage term

• The comfort and convenience of making only one monthly payment instead of making multiple payments on your credit cards and other loans

• Improving your credit score by reducing the amount you owe and now being able to make all of your payments on time

Not sure if accessing home equity is right for you? The numbers don’t lie. Let’s run them together and then you’ll have an honest, unbiased recommendation and a plan of action.

Give me a call at 1-888-561-2679 for a pressure-free consultation to run the numbers or you can book an appointment on my calendar at calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Reasons to consider a reverse mortgage

10 reverse mortgage signs

A reverse mortgage can be a valuable financial tool for seniors seeking to tap into the equity of their homes without selling their homes.

This unique financial solution can provide a source of income, enabling Canadian homeowners who are 55 years of age and older to enjoy their retirement years more comfortably.

Here are 10 signs someone might be a potential reverse mortgage client:

1. Declined at their bank due to credit or income issues

You may have been declined by a traditional bank due to poor credit or a lack of regular income to support a financing request.

2. Facing tax consequences on investments

Seniors who need to cash out investments and are concerned about the tax implications might benefit from a reverse mortgage, which allows them to access funds without being charged any income tax.

3. Payment struggles, late payments or missed payments

Individuals who face challenges with making timely mortgage payments or have missed other payments may find relief through a reverse mortgage, as it doesn't require monthly payments and the funds can be used to pay off debts.

4. Early inheritance assistance for family

Some seniors wish to provide financial support to their family or heirs before they pass away. A reverse mortgage can help them access their home equity for that purpose.

5. Reduced income due to spousal loss

When a spouse passes away, the surviving partner's income may significantly decrease. A reverse mortgage can help bridge this income gap and maintain financial stability while allowing them to stay in the matrimonial home.

6. “Grey divorce” with one spouse buying out the other

Seniors experiencing a "grey divorce,” where one spouse wants to buy out the other's share of the home, can use a reverse mortgage to facilitate this financial transition which will allow them to stay in their home rather than having to sell.

7. Real estate investment or bridge financing

Individuals seeking to invest in real estate or bridge a financial gap might consider a reverse mortgage as a means to access their home's equity without selling it.

8. Children assisting elderly parents with home equity

Seniors with children who are providing financial assistance can use a reverse mortgage as an alternative to being supported by their kids, allowing them to maintain financial independence.

9. Home care or long-term care costs

Seniors in need of funds for home care or long-term care expenses for a spouse may be able to turn to a reverse mortgage to cover these costs without depleting their savings.

10. Need to increase monthly cash flow

Many seniors struggle to meet their daily expenses. A reverse mortgage can be an excellent solution for improving monthly cash flow and ensuring a more comfortable retirement.

As a mortgage broker, I can help you make an informed financial decision about a reverse mortgage. It's crucial to complete a thorough assessment and obtain personalized advice to ensure a reverse mortgage is the right choice for your individual unique circumstances.

If you would like to discuss whether a reverse mortgage might be a viable option for you, please email me at [email protected] or you can set a time for a chat here on my calendar at www.calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Early mortgage renewal may not be the best option

Renewing your mortgage

It’s interesting to note that approximately half of all mortgages in Canada are set to renew in 2025 or 2026, due in part to the real estate frenzy that transpired over the course of the COVID-19 pandemic along with record low interest rates.

Analysts estimate $251 billion in mortgages will come up for renewal in 2024 and another $352 billion the following year. Most people will face higher interest rates with increased mortgage payments.

If your mortgage is up for renewal in the next few months, you may have already received an early renewal offer from your lender aiming to entice you with the possibility of avoiding potentially higher interest rates.

While the appeal of an early renewal may be strong, it's essential to be aware of the potential drawbacks and costs associated with that decision.

Let's explore why renewing your mortgage early may not be the best course of action.

One significant drawback of early mortgage renewal is that the higher interest rate becomes effective immediately. Unlike waiting until your actual renewal date, your bank will not hold the current rates for you. If you choose to renew early, transitioning from a lower rate to a higher one, you'll lose the advantage of the lower rate for the remaining duration of your current mortgage term.

Consequently, your interest costs will increase right away, and you may find yourself facing a higher mortgage payment right from the start.

Furthermore, early mortgage renewal can be a risky move due to the unpredictable nature of interest rates. The rates are constantly fluctuating, and if you decide to renew early and the rates subsequently decrease, you could end up paying more for your mortgage over the long run. This risk of potentially missing out on even lower rates in the future is an important factor to consider when evaluating your renewal options.

So, what alternatives do you have without opting for an early mortgage renewal? As a mortgage broker, I can offer you a rate hold, which allows you to secure a specific interest rate for a predetermined period, typically up to 120 days. This means that even if interest rates rise during this period, you'll still benefit from the low rate you locked in. With a rate hold, you have the flexibility to monitor the market and make an informed decision about when to renew your mortgage, all while enjoying the advantages of your current lower interest rate until your renewal date.

By working with a mortgage broker, such as myself, you gain access to a wide range of mortgage options from various lenders. I can help you shop around for the best rates and guide you in understanding the different terms and conditions associated with each mortgage product. This ensures that you can make an informed decision, aligning your mortgage choice with both your short-term and long-term financial goals.

In conclusion, renewing your mortgage early can be a costly and potentially risky decision. Instead, consider collaborating with a mortgage broker who can offer you a rate hold, allowing you to secure a low rate until your renewal date. Additionally, I can assist you in exploring various mortgage options, ensuring that you make an informed decision tailored to your specific needs. It's a win-win situation that enables you to keep an eye on the market while maintaining your existing lower interest rate until the end of your mortgage term.

If you would like to discuss your upcoming mortgage renewal and explore the possible options available to you, please feel free to book a convenient time on my calendar for a quick chat. You can find my calendar here: www.calendly.com/april-dunn or you can email me at [email protected]

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.