What rate am I going to get? Yes, it's an important question; However, I don't think it's the first question you should be asking.

A mortgage renewal is one of the best opportunities you have to step back and look at your entire homeownership and financial picture.

Your home may be worth more — or less (gulp!) — than it was when you took out your mortgage.

·         Your mortgage balance has changed.

·         You've built equity.

·         Your income may have changed.

·         Your family may have changed.

·         You may have accumulated other debt.

 Your plans for the next five years may look completely different than they did when you signed your last mortgage, so why would we look at only the interest rate?

 Start Planning 6 Months Before Your Mortgage Renewal

You don't need to choose your next mortgage six months before renewal.

You need to start understanding your position.

I believe a good renewal strategy should answer five questions:

1. What is my home worth today?
2. Where does my mortgage stand today?
3. How much interest am I actually paying?
4. How much equity have I built?
5. What do I want my finances and housing situation to look like over the next 3–5 years?

 Let's break those down...

 1. What Is Your Home Worth Today?

Your home's value isn't just interesting information; it will have a significant impact on your mortgage strategy. If you purchased your home several years ago, its current value may be very different from what you originally paid.

Why does that matter? Because the relationship between your home's value and your outstanding mortgage tells us how much equity you've built. That can potentially create options at renewal.

Depending on your circumstances, that equity could factor into conversations about:

• consolidating higher-interest debt;
• renovations or major home improvements;
• establishing a home equity line of credit;
• helping fund another property;
• restructuring your finances; or
• simply leaving the equity untouched and focusing on paying your mortgage down faster.

 Your home value isn't the strategy. It's information we can use to build the strategy.

 2. Where Does Your Mortgage Actually Stand?

Pull out your mortgage statement. Don't just look at the interest rate. Look at:

•  Your current mortgage balance.
•  Your remaining amortization.
•  Your current payment.
•  Your maturity date.
•  Your fixed, variable or adjustable-rate structure.
•  Your prepayment privileges.

And importantly,

•  How much principal have you actually paid down?

 This is something I believe homeowners should understand throughout their mortgage — not discover every three or five years at renewal. Your mortgage payment isn't simply a bill.

Every payment is divided between principal and interest, and that relationship can change substantially depending on your mortgage structure and interest rates.

The question I want homeowners asking isn't only:

"What is my payment?"

It's:

"Is my mortgage progressing the way I expected it to?"

 3. How Much Interest Are You Actually Paying?

This is a big one for me. Mortgage advertising naturally focuses on interest rate.

·         3.89%.

·         4.09%.

·         4.19%.

And yes, rate matters. But I want my clients thinking about something else as well:

The volume of interest. In other words: How many actual dollars of interest are leaving your pocket?

A slightly lower mortgage rate doesn't automatically mean you're making the best financial decision.

We also need to consider things like:

• mortgage balance;
• amortization;
• payment frequency;
• prepayment options;
• penalties;
• other higher-interest debt; and
• how long you realistically expect to keep the mortgage.

 This is also why reviewing your mortgage before renewal can be so valuable.

Instead of simply comparing your existing rate to today's rates, we can look at the estimated cost of maintaining your current mortgage and compare different strategies.

Sometimes there is an opportunity.

Sometimes the best advice is to wait. And,

sometimes the mortgage you already have is exactly where you should stay.

The objective isn't to make a change. The objective is to know whether a change makes sense.

 4. How Much Equity Have You Built — And Should You Do Anything With It?

Your equity is essentially the portion of your home's value that isn't financed by your mortgage or other debt secured against the property. As your mortgage balance decreases — and if your property's value increases — your equity can grow.

At renewal, I want you to understand that number.

But understanding how much equity you have doesn't mean I automatically recommend borrowing against it. Quite the opposite.

The better question is:

Could this equity help accomplish something important in your financial plan?

For example, someone carrying significant credit-card or unsecured debt may want to explore whether consolidating that debt makes sense.

·         Another homeowner might be planning a renovation.

·         Someone else may want a HELOC available for future flexibility.

·         Another family might be considering purchasing an investment property.

·         And another homeowner may be best served by doing absolutely nothing with their equity.

Access to money isn't a reason to borrow it. There should be a purpose and a strategy behind the decisions.

 5. What Does the Next 3–5 Years Look Like?

This may be the most important renewal question. Before deciding whether you want a 3-year mortgage, a 5-year mortgage, fixed, variable, or something else, let's talk about your life.

·         Are you planning to move?

·         Could your family grow?

·         Are your kids leaving home?

·         Are you approaching retirement?

·         Do you expect your income to change?

·         Are you considering a major renovation?

·         Could you receive an inheritance or large bonus that you'd want to put against the mortgage?

·         Are you considering purchasing another property?

·         Do you expect to sell this home?

 These questions matter because the "best mortgage" on a spreadsheet isn't necessarily the best mortgage for you.

A very attractive interest rate attached to a mortgage that doesn't provide the flexibility you need can become expensive very quickly. Your mortgage should support your financial plan — not dictate it.

 What I Want to Know 6 Months Before Your Renewal

When I'm reviewing a mortgage approaching renewal, I'm trying to understand the complete picture:

HOME VALUE: What is the property approximately worth today?

MORTGAGE PROGRESS: What is the outstanding balance, remaining amortization and current payment structure?

INTEREST COST: How much interest are you paying, and are there realistic opportunities to reduce the total cost of borrowing?

HOME EQUITY: How much equity have you accumulated, and does accessing any of it make financial sense?

PURCHASING POWER: If you're considering moving, what could your current equity, income and today's mortgage environment mean for your next purchase?

FUTURE PLANS: What are we actually trying to accomplish over the next several years?

Once we understand those things, then we talk about rates and lenders.

 Should You Just Sign Your Bank's Renewal Offer?

Maybe.

MAYBE!

Your existing lender may offer you an excellent renewal. If the mortgage structure, rate and terms still fit your goals, staying with that lender could absolutely make sense. But I wouldn't sign the renewal simply because it's convenient.

Your lender's renewal offer tells you what they are prepared to offer you.

It doesn't necessarily tell you:

·         What other options are available?

·         Could another mortgage structure be better?

·         Should you consolidate debt?

·         Should you change your amortization?

·         Should you access equity?

·         Would a different term better fit your plans?

·         What will the mortgage actually cost you?

Those are different questions that require more thought and can have a tremendous impact on the next 3 to 5 years.

 My Approach: Don't Just Renew. Review.

One of my biggest concerns with the mortgage industry is how little attention can be paid to homeowners between funding and renewal.

I don't think it’s fair to you, when you only hear from your mortgage professional once every three or five years.

That's why I've invested in technology that allows me to provide my clients with an updated monthly homeownership report.

It can help track things such as:

• estimated home value;
• mortgage balance and progress;
• potential interest-saving opportunities;
• estimated home equity;
• potential access to equity; and
• purchasing power.