Choose a mortgage term that fits your property plans
Choosing a mortgage term means choosing how long the contract will apply to a property you may sell, renovate, refinance or continue to own. Compare the renewal date and conditions with those plans, as well as the rate and payment.
In Streetwise's archived Adapt & Thrive interview, Dalia Barsoum asks Rob McLister how borrowers should approach term selection in an uncertain rate environment. They discuss the difference between forecasting rates and choosing a mortgage that fits the borrower’s plans and ability to manage payment changes. The interview's forecasts and product suggestions reflect 2022; they are not recommendations for today.
Mortgage term and amortization are different
The term is the period covered by the mortgage contract. Amortization is the period used to repay the debt. A mortgage can reach the end of its term with a balance still owing, requiring repayment or renewal.
For your comparison, record both. Ask when the contract ends, what balance is expected then and what decisions could arise before that date. This helps you compare the commitment with the period you expect to own the property and the financing changes you may need.
Check the costs of selling, refinancing or changing the mortgage
You may intend to sell after improvements, refinance to access capital or make additional payments as cash becomes available. For each option you are considering, ask the lender how those actions would work under the contract.
Breaking a closed mortgage early normally involves a prepayment penalty. Other costs may apply, so request the costs for the change you are considering rather than estimating them from the rate alone.
The contract matters because a sale, refinance or extra payment can have costs or restrictions. Compare the actual terms with the changes you expect to make, rather than choosing a shorter or longer term solely on a rate forecast.
Compare payment and interest-rate uncertainty
Fixed and variable rates expose you to different kinds of uncertainty. With variable interest, confirm whether the scheduled payment adjusts or remains fixed, and how a rate change affects principal repayment. A stable payment does not mean the balance is following the same path. Our trigger-rate guide explains how interest changes can affect repayment under a fixed-payment variable mortgage.
For a rental, consider the mortgage payment beside property income and operating expenses. Then consider the other holdings, renewals and planned work on other properties. What would need attention if payments rose or less principal were repaid than expected?
Review your property plans before mortgage renewal
An upcoming renewal gives you a point to review the mortgage against your current needs. Start considering options before the term ends. If another lender is involved, include its assessment and the costs of switching in the comparison.
Ask whether the priority is a payment you can carry, faster debt repayment, funds for another investment or flexibility for a possible sale. Those priorities can lead to different comparisons even for properties with similar balances.
Compare the mortgage options with Streetwise
Gather your current mortgage statement and agreement, renewal date and any offers you want to compare. Include what you expect to do with the property and the mortgages and planned work on your other properties.
The complimentary Portfolio Financing Review considers each investment property and the holdings together, guided by your priorities. For a home purchase, renewal or refinance, explore home financing. You can also contact Streetwise directly.
Watch the original conversation
Adapt & Thrive: Expert Interview with Rob McLister
This archived interview discusses the 2022 rate cycle. Its market expectations, numerical examples and product preferences belong to that context. Use your current agreement and lender’s written offer when comparing mortgage terms today.
