As we step into 2024, a significant number of mortgages are approaching their renewal dates. Let’s explore the potential costs associated with mortgage renewals, particularly for those who secured their mortgages in 2019, as it’s been 5 years since.
Before exploring the some basic renewal costs, let’s talk about some ground rules:
Since I’m not a mortgage broker, these numbers are just using averages and an online calculator illustration. For your exact numbers, contact a mortgage professional
We will use a 20% down payment and not factor in how much has been paid down. The calculation could be different for everyone depending on their payment frequency and amortization length
25 year amortization (how long it would take to pay down the property if you stuck to the payment schedule).
I used 3 price points: $600,000, $1.1m and $1.6m
As of the time of filming the December numbers haven’t been posted but they will probably be out when this goes live, I don’t anticipate them being too far off November’s pricing
The new payments at renewal are based on the mortgage balance remaining.
Our calculations are based on the assumption of a 5-year fixed-rate mortgage.
For this article, I’m just illustrating the difference between a 3% rate and a 5% rate. For the 6% and 7% calculations, check out the full Youtube video.
Starting with a $600,000 property, a 20% down payment leaves a remaining mortgage balance of $480,000. If the original interest rate was 3%, the monthly payment might have been around $2,272. However, a renewal at 5% could increase this to just under $2,800,a $520 difference.
For a $1.1 million property with a $880,000 remaining mortgage balance, a 3% rate might result in a monthly payment of approximately $4,165. A 5% renewal rate could elevate this to about $5,118, nearly a $1,000 difference.
In the case of a $1.6 million property with a $1.28 million remaining mortgage balance, a 3% rate could lead to a monthly payment of roughly $6,050. A 5% renewal rate might increase this to around $7,500, illustrating a $1,500 difference.
Several key takeaways emerge from these scenarios. Firstly, the misconception that doubling interest rates leads to doubled mortgage payments is not accurate. Secondly, it’s crucial to note that these calculations do not consider any paydown on the mortgage during the 5 year term.
As we approach 2024, it’s vital to assess whether the property has gained equity. Many properties in the greater Toronto area have witnessed appreciation. Homeowners should consider their property’s current value and evaluate whether it makes sense to explore new opportunities or if they love where they live, continue to enjoy it!
Navigating mortgage renewals requires careful consideration of various factors, including interest rates, property values, and individual financial situations. While this blog post provides illustrative examples, it’s crucial to consult with a mortgage professional to obtain personalized advice tailored to your specific circumstances.
As we embark on this journey into 2024, understanding your personal financial situation is incredibly important to make informed decisions about their financial future. All of these factors are important to consider when thinking of making a move.
If you have further questions, feel free to reach out. I’m always here to guide you through the complexities of the Toronto real estate market.
Before exploring the some basic renewal costs, let’s talk about some ground rules:
Since I’m not a mortgage broker, these numbers are just using averages and an online calculator illustration. For your exact numbers, contact a mortgage professional
We will use a 20% down payment and not factor in how much has been paid down. The calculation could be different for everyone depending on their payment frequency and amortization length
25 year amortization (how long it would take to pay down the property if you stuck to the payment schedule).
I used 3 price points: $600,000, $1.1m and $1.6m
As of the time of filming the December numbers haven’t been posted but they will probably be out when this goes live, I don’t anticipate them being too far off November’s pricing
The new payments at renewal are based on the mortgage balance remaining.
Our calculations are based on the assumption of a 5-year fixed-rate mortgage.
For this article, I’m just illustrating the difference between a 3% rate and a 5% rate. For the 6% and 7% calculations, check out the full Youtube video.
Starting with a $600,000 property, a 20% down payment leaves a remaining mortgage balance of $480,000. If the original interest rate was 3%, the monthly payment might have been around $2,272. However, a renewal at 5% could increase this to just under $2,800,a $520 difference.
For a $1.1 million property with a $880,000 remaining mortgage balance, a 3% rate might result in a monthly payment of approximately $4,165. A 5% renewal rate could elevate this to about $5,118, nearly a $1,000 difference.
In the case of a $1.6 million property with a $1.28 million remaining mortgage balance, a 3% rate could lead to a monthly payment of roughly $6,050. A 5% renewal rate might increase this to around $7,500, illustrating a $1,500 difference.
Several key takeaways emerge from these scenarios. Firstly, the misconception that doubling interest rates leads to doubled mortgage payments is not accurate. Secondly, it’s crucial to note that these calculations do not consider any paydown on the mortgage during the 5 year term.
As we approach 2024, it’s vital to assess whether the property has gained equity. Many properties in the greater Toronto area have witnessed appreciation. Homeowners should consider their property’s current value and evaluate whether it makes sense to explore new opportunities or if they love where they live, continue to enjoy it!
Navigating mortgage renewals requires careful consideration of various factors, including interest rates, property values, and individual financial situations. While this blog post provides illustrative examples, it’s crucial to consult with a mortgage professional to obtain personalized advice tailored to your specific circumstances.
As we embark on this journey into 2024, understanding your personal financial situation is incredibly important to make informed decisions about their financial future. All of these factors are important to consider when thinking of making a move.
If you have further questions, feel free to reach out. I’m always here to guide you through the complexities of the Toronto real estate market.
