Mortgage Coming Up for Renewal? Assess Your Options

mortgage, though. Lenders offer homeowners various payment options, such as paying monthly or bi-weekly, says Levine.

“If you’re paying bi-weekly, interest accrues for two weeks before it gets paid off and if you pay monthly, interest accrues for a month before being paid off. Paying bi-weekly doesn’t create a big savings. Depending on the size of the mortgage, the difference could be less than $10 saved per year,” he explains. However, adding a biweekly accelerated payment can save tons of money. For example, if your mortgage payment is $500 every two weeks and you add another $50 as an accelerated payment, that goes straight towards your capital. “Your initial $500 pays a portion of capital and a portion of interest. That $50 goes 100% towards capital, which pays the mortgage down faster and decreases your amortization,” says Levine.

Curious what your potential mortgage payment might be? Check out the REALTOR.ca Mortgage Calculator to see some possibilities.

So, based on the example above, if you started with a 25-year amortization and bi-weekly payments, you’re done in 25 years. An accelerated payment allows you to pay off your mortgage in roughly 21 years.

Should you go from a fixed to a variable rate?

If you’re unsure whether to take a fixed or variable interest rate for your mortgage, you’re not alone.

“Now is a very strange time in the market,” admits Levine. “Usually, a client takes a variable rate because it starts out lower than the fixed rate, but today the variable rate is over 1% more than the five-year fixed rate, so people are really in a tough spot. They’re taking the variable rate knowing they’re losing significant money now but hoping rates climb down enough to first break even and then gain back everything you lost and then some.”

Levine is seeing many homeowners taking a three-year fixed term instead of five-year and hoping to benefit from lower rates down the line. If you decide to go with a variable rate, most lenders offer a one-time free change to a fixed term if you change your mind.

Which experts should you speak to? Don’t lock yourself into anything without first consulting your financial advisor, bank manager or mortgage broker. These professionals can help you make the best decision, says Levine.

“Speak to an expert to see if now is a good time to lock in or if you should continue to ride the variable wave,” he suggests.

As for managing your money with higher mortgage payments, your financial advisor can provide tips on saving and budgeting—especially if your family or job situation has changed.

“The cost of living has gone up, which puts a greater financial burden on people,” says Levine. “I noticed in 2020 and 2021 that people weren’t thinking forward to the future, and many were borrowing the maximum to get into their house. Now, you definitely have to budget, and set aside a buffer for anything that might come up.”