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Canadian investors, accustomed to nearly a decade of low interest rates, have raised interest rates five times since last summer. However, the central bank hinted that the rate hike is not yet in place, and it remains to be seen whether there will be another rate hike in December. In the period of rising interest rates, families who are about to renew their home loans (renew mortgage) need to know in advance what they should pay attention to and pay attention to in order to choose the financial policy that is most suitable for their families.
Wang Hongyu (Henry), a housing loan expert at BMO Bank, told Sing Tao “Urban Real Estate” that the longest term of Canadian mortgage contracts is 10 years, while most borrowers choose contracts within five years. As a result, it is difficult for most people to pay off all their mortgages within the same period of contract. “the vast majority of borrowers need to renew their mortgage contracts when they expire. Every family should know as soon as possible when to renew the contract and what are the steps and considerations of the renewal. “
First of all, if you are satisfied with the services and products of the original loan financial institutions, what you need to do is to understand the policy of early contract renewal. Many people do have the idea of planning ahead of time to renew the mortgage and find the bank early to consult the interest rate procedure. However, interest rates on mortgages signed before 2017 are very low compared with what they are now. Wang Hongyu said that the original lending financial institutions usually allow the contract to be renewed N months before the expiration date. However, if the borrower’s original loan interest rate is very low, and the current mortgage interest rate is high, premature renewal of the contract will cause the low interest rate to expire prematurely and the high interest rate to take effect in advance. “I suggest that the contract be renewed two months in advance. Under normal circumstances, in the original bank to renew the contract in advance, the time to lock in an interest rate will not exceed one month. If the interest rate of the original contract is low, the execution time of the original contract will be reduced because of early renewal. Once you choose to renew the contract ahead of time, the new interest rate will take effect immediately next month. For example, the original loan interest rate is 2.09%, and the current market interest rate is 3.3%. It is now March, and the original loan contract expires on July 1. If you choose to renew the contract in advance on May 15 and lock in the 3.3% interest rate, then the new contract interest rate of 3.3% will take effect on June 1. The purpose of renewing the contract two months in advance is not to force yourself to run out of time to choose, while allowing the original low interest rate not to expire prematurely. “
Wang Hongyu concluded that when interest rates are on an upward trend when renewing a contract, borrowers are often faced with a dilemma: if the contract is renewed in advance, the low interest rate will end early; but if the contract is not renewed in advance, it is very common for the interest rate to continue to rise, which has been very common since 2018. “therefore, I suggest that under such circumstances, we can consider applying for new loans from other banks. The new bank can lock in interest rates for 130 days, or 4 months and 10 days. Five months before the expiration, you can make an inquiry with a bank other than the original bank and prepare the materials, so that you can leave yourself one more choice. “