TORONTO, ONTARIO--(Marketwire - May 10, 2012) - As part of BMO Financial Group's ongoing commitment to financial literacy and 'Making Money Make Sense' for Canadians, BMO is releasing a financial tip every week in 2012.
BMO's Financial Tip of the Week: Review All of Your Mortgage Refinancing Options
Choosing the right mortgage to fit your specific needs and situation is a critical part of homeownership. There are many things to consider when your mortgage comes up for renewal and it is important to review all of your refinancing options to ensure you make a well-informed, financially responsible decision.
Things to consider when refinancing your mortgage:
- Do your research: It's important to research all available options. There could be a better-suited mortgage available to fit your current or future needs. For example, if you have had a variable rate mortgage but are looking for payment certainty and rate protection, you may want to consider moving to a fixed rate.
- Review your financial situation: Is reducing your amortization an option? For example, on a $400,000 mortgage at a 5 per cent interest rate, moving from a 30-year to a 25-year amortization can save upwards of $70,000 in interest over the life of the mortgage.
- Stress-test your budget: While interest rates have hovered near historic lows, rates are set to climb within the next 12 months. Stress test your mortgage at a higher rate to ensure you will be able to afford your mortgage payments when interest rates rise.
According to a recent BMO survey, Canadian homebuyers want payment certainty for as long as possible. The majority (65 per cent) are looking to lock in at a fixed rate to take advantage of low interest rates while they are available.
"Spring is a good time to revisit financial priorities to ensure they continue to coincide with both your present situation," said Laura Parsons, Mortgage Expert, BMO Bank of Montreal. "BMO encourages Canadian homeowners to stress-test their mortgage to ensure a rise in interest rates is manageable. Locking in to a fixed rate can provide added peace of mind in the face of potential interest rate hikes."
Ms. Parsons added that choosing a shorter amortization allows Canadians to save thousands on interest costs over the life of their mortgage and begin building equity sooner.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $538 billion as at January 31, 2012, and more than 47,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.