Should you refinance your Mortgage during COVID -19 Pandemic?
Whenever there is a global issue, be it a disease outbreak or war, it is never good for the global economy and we are seeing the same effect with the outbreak of the COVID-19 pandemic. Life as we know it has come to halt. Most to all business offices are closed, complete nations are under lockdown, which only means that many businesses are down and could be facing financial troubles. Many companies have laid off their employees and some have shut down altogether.
But how does someone still paying a monthly mortgage make sense of the economy and their finances during this pandemic? Is it better to renew their mortgage or opt to refinance during these times? Not to worry, this is where a mortgage broker can help make sure you make the best choice for your situation. Read on know why, or contact Brampton Mortgage Broker. Our team members will be happy to assist you.
A summary of mortgage renewal
As you take on a mortgage when you purchase a property, your plan is to pay off the mortgage before the end of the term. However, not everything happens according to plan. Generally, over the period the mortgage term, there might be other financial needs you might have to cater to which may lead to late payments or no payment for some months. Eventually, the missed payment will need to be paid in full before the end of the term, along with the regular scheduled payments to bring your mortgage up to date. If you are having a hard time making payments, then it is best to make sure to contact your mortgage lender or mortgage broker whenever you feel you are unable to make your regularly scheduled mortgage payment. This will allow you to work out a solution and payment plan to bring your mortgage payments up to date.
When you mortgage is at the end of the term, your mortgage lender will send you a renewal letter by mail, letting you that your mortgage is up for renewal and a new offer is available for you. This mortgage renewal offer will contain the following in information:
- Balance mortgage loan amount at the renewal date
- Rate of interest for the premium
- The term
- Frequency of payments
- Fees that may apply
The mail will generally be sent 21 days in advance or even earlier so you have the time to consider looking at your options before you sign the mortgage renewal.
Now, in a COVID-19 free world, you would think about terminating the contract if you are not happy with your lender and you want to have a look in the market so you can take advantage of a better mortgage rate and terms. Even then, first you would have to apply all over again and make sure you are financially capable to take on the new mortgage. That means you will need to show proof of income and repayment history and go through the entire approval process all over again. At present, most of the businesses are closed and if you are laid off then the choice of looking for a new mortgage lender is completely out. Not to worry you can always contact Brampton Mortgage Broker, we have many different types of financing options available and our team members will be happy to assist you if you choose to refinance your mortgage and switch lenders.
However, if you don’t want to go through the mortgage approval process all over again, you may be able to renew your mortgage and renegotiate the terms and conditions with respect to the new contract with your current lender.
- Check if you can increase your premium payments so you can close your mortgage loan early
- Think if you have any financial goals in the near future that may affect your mortgage payments
You can have a discussion with your broker beforehand. If you are happy with the old set of terms then you just have to sign the form and send it back and you will be set for another term.
You can also renew your mortgage early
Prior to COVID-19, the real estate industry was doing well with about a 27% increase in sales compared to 2019. It has almost come to a stalemate now. The situation speaks for itself, it is not a good time to go out in the market looking for a new lender. So you might want to renew your current mortgage.
Now if you are about to take on a mortgage, then you should know that some lenders offer an early renewal clause in the mortgage loan agreement. If you opt for this, at the end of a contract, your mortgage loan term will automatically renew at the same interest rate.
The advantage that you will get is, you won’t have to worry about any new clauses or new interest rates. You will be paying your monthly premiums like you used to, till the end of the second term. Also, when mortgage interest rates will rise, you will still payback at the same interest. The downside is, you will be locked in the same interest rate and cannot negotiate for something less if the market produces more favourable rates, you are stuck.
The CMHC COVID-19 mortgage payment deferral plan
If you have already signed your mortgage renewal plan but still struggling to pay your mortgage because of the present situation, the can also have a look at the mortgage payment deferral introduced by the CMHC. The plan allows you to pause your mortgage payment for a while for a specified amount of time. The interest amount is not cancelled and you will gave have to make the payments in full at a later time. You can find out more about this plan by visiting the CMHC website or getting in touch with us at Brampton Mortgage Broker.