Extend the amortization period of your mortgage
Repayment extension is a preferred option lately as 25+ yr mortgages turn out to be the norm. In 2023 RBC reported that 43% of mortgage loans have repayment periods of greater than 25 years. And as first announced within the 2024 federal budget, the federal government has prolonged the repayment period for insured mortgage loans for brand new construction to 30 years.
Larock says a borrower can qualify for and refinance a 30-year mortgage even in the event that they have lower than 20 percent equity within the property – provided the house is latest and valued at lower than $1 million.
This implies that the mortgage might be paid off more slowly, however the installments might be lower.
But this strategy should only be used as a final resort, says Warden. “It just means you’ll pay a lot more interest because of the extended term,” he says. Plus, it could mean you will still have a mortgage in retirement when your income is lower or nonexistent.
Play it secure
Instead of searching for a brand new rate at renewal, you might wish to stick to your current lender. If you have been diligent in paying off your mortgage, “you can renew with that lender without having to requalify — even if you couldn’t requalify based on today’s rates,” Larock says.
And given the present economic uncertainty, the conservative option to roll over the mortgage at a hard and fast rate is to accomplish that, he says, although the recent rate cut means variable rates, that are higher, will come down. “We don’t know what the future holds – and fixed rates are lower now,” he says.
Consider advance payments
If your mortgage allows for early repayment, consider rolling your future extra income into the mortgage. “You can put money into the mortgage by taking advantage of prepayment penalties, which can shorten the repayment,” says Larock. “Many lenders offer a 20% annual prepayment penalty, and if you maximize that over five years, you can pay off the entire mortgage in five years.”
Consider non-traditional sources of financing to repay your mortgage faster. For example, Warden recently helped an elderly couple repay a part of their mortgage through a retroactive WSIB settlement. “Their mortgage is about half what it was 24 months ago,” he says. “Now they can envision themselves retiring.”
