Plenty can change in someone’s life during the course of a standard five-year mortgage.
It could be a career change, kids, retirement or newfound money or such a major event is on the horizon. All can affect the type of mortgage that best meets your financial needs and limitations.
A lot of people don’t like to face up to it but doing an annual financial check-up is a very smart thing to do.
We often just wait for a renewal letter before looking at our mortgage, and even then we are likely send the contract back without considering if it is the best rate possible and meeting our current needs because we feel changing providers or the terms is futile.
You should put just as much thought into a renewal or a review as you did when you signed the initial deal. We tend to become complacent about our mortgage payments and we could be saving a lot of money with a change.
Rates are an obvious thing to pay attention to. The more adverse you become to risk, the less likely a variable mortgage will be right for you.
If rates are going up, make sure you can make the higher monthly payment that may come at renewal time, or lock into a fixed rate if you’re on a variable. If rates are dropping below your existing rate, you might want to refinance or renew early.
Even though banks are in the business of getting as much interest from you as they can, many will allow people to pay a lump sum of the principal on the mortgage’s anniversary and increase their monthly payments. An extra $100 a month on a standard $200,000 mortgage could save almost $18,000 in interest and shorten the amortization period by about four years.
Or maybe you just want to consolidate higher-interest unsecured debt into your mortgage. Rolling that into your mortgage can significantly save on interest costs and that will help you get out of debt sooner
A mortgage can also help you become more tax efficient if you’re thinking of investing in a business, buying a rental property or putting some money into mutual funds or the stock market.
The interest paid on money borrowed on a principal property can be written off against such investment revenues.
But the biggest reason for making changes to your mortgage mid-stream may be because it could be a lot easier to do something before your situation changes.