Five Strategies to Recession Proof your Mortgage
Many of us are still struggling with how the Covid 19 Crisis is going to impact our lives. If you are still uncertain about your mortgage and how to plan for the future, please don’t hesitate to contact me so that we can review your options and decide if any of the options below might help to ease your mind and put you in a more comfortable financial...and mental position!
- Lower your payment by either re-amortizing your mortgage or stopping your accelerated payments. There is no cost to do this and each bank or lender will treat this strategy differently. The first step is to contact your lender and find out if either of these options are available to you and how much you can decrease your payment by doing this.
- Refinance your mortgage to consolidate higher interest debt into your monthly mortgage payment. The cost to do this may include a penalty on your current mortgage and legal registration fees, these costs may be included in the new mortgage to eliminate out of pocket expenses. This option would require that you already have significant equity in your home. Eg. maximum mortgage available on a refinance is 80% of current property value.
- Add a Home Equity Line of Credit as an alternative to refinance above, you may be able to add a HELOC behind your first mortgage to a maximum of 80% of your current home value. Your costs would likely include an appraisal and legal fees to register the HELOC. The HELOC will allow you to access your equity to consolidate other higher interest debt, or just to have funds available to you in case of unforeseen events.
- Renew your mortgage early to lower your interest cost and lower your payment. Your current lender may offer early renewal options, however always discuss your options with your mortgage broker to determine what other options may work for you. Best rates are not often offered by your existing lender, and if you transfer your mortgage to a different lender you may be able to add up to $3000 of the mortgage penalty onto your mortgage balance so that you don’t have to pay it out of pocket. Transferring your mortgage to a different lender mid-term typically does not cost you any additional fees other than the payout penalty.
- Skip a Payment or Payment Deferral Programs are currently being offered by most lending institutions. The requirements and offerings differ from lender to lender and because of the Covid-19 Crisis, there is no credit impact, eg. your deferral will register on your credit report but will not negatively impact your credit score. With some lenders you may have to prove economic distress eg. job loss to qualify for the deferral program. The deferred payments and interest will be capitalized (added to your mortgage balance), eg. This deferral option is not a deletion of interest or payment.