If you're a first time mortgage shopper, you may have the impression that when you get a mortgage, it will stay the same until your house is paid off. However, mortgages will need renewing every 3 to 5 years depending on which type of mortgage you buy. This is an opportunity for the bank to bring your mortgage more in line with the current market and for you to try and renegotiate the terms to make them more favorable to you. Here are some of the things you'll need to think about when your mortgage comes up for renewal.
The first and most important thing to remember is that the bank does not have to renew your mortgage. Mortgage refinancing in Toronto most often leads to renewal, but if the situation has changed your mortgage may not be renewed. Sometimes this is because the company is closing out, other times it may be because you've lost your source of income or credit rating. Either way, you need to check in with your bank early so you have enough time to find a new mortgage before the term is up.
Most mortgages, however, need only be refinanced or renegotiated before they are renewed. Your mortgage rate is not guaranteed to be carried over through a renewal, so if the mortgage rates in Toronto have gone up since you bought your home, you can expect to pay more during the coming term. If this is the case, you might try to negotiate a better rate by threatening to switch banks, or ask for a longer terms so your monthly payments can stay the same (this will, of course, cost you in the long run).
If you've been thinking about switching from a fixed rate to a variable rate mortgage, renewal time is the time to bring it up. Perhaps when you bought your property the rates were high and locked in and they have been going down. You may want to switch to a variable rate to take advantage. Likewise is your variable rate has shot up over the term, you might want to switch to a fixed rate so you always know where you stand.
Another thing you're able to do at renewal time is re-borrow some of the money you have already paid. If the bank approved this refinance, you can use the equity in your house to buy a second property and flip it, buy a vacation property, or invest in a new car or some renovations on your home. Just be prepared for your term to lengthen correspondingly. Other options at refinancing time include folding your credit card or car debt into your mortgage to take advantage of the better rate.