Tuesday, 24 October 2023
By Leahs Mortgages
Leah Zlatkin interviewed by the Financial Post: “Refinance or renew? How to choose when mortgage interest rates create sticker shock”
Many Canadian homeowners are facing sticker shock with their monthly payments as their mortgage comes up for renewal, leaving them with a crucial choice: whether to renew or refinance their home loan. “They’re used to paying $2,000 every single month for the last five years and all of a sudden, now their payments are going to go up to $4,000,” said Leah Zlatkin, a mortgage expert at LowestRates.ca.
When a homeowner renews an existing mortgage at the end of its term, traditionally five years, the lender updates the contract with a new interest rate — and as Zlatkin says, most mortgage-holders will see higher monthly payments after a swift string of increases to the Bank of Canada’s key rate.
Refinancing involves breaking the current contract entirely and signing a fresh one. It’s a useful option for those looking to access home equity, consolidate debt or switch lenders for a better rate. It also allows the borrower to extend their amortization period, or the length of time to fully pay off the mortgage.
For those with thinner wallets, “you’re refinancing in order to re-amortize to a longer period of time to ease those payments,” Zlatkin said
