What should you do if policy rates fall? Refinance or renew?

The crucial question for homeowners and potential borrowers in Quebec is whether it makes more sense to refinance their mortgage to take advantage of lower rates, or simply wait for the renewal.

Let's analyze the two options.

Overview of policy rates

Rate cuts are expected. For example, a drop to 3.50% is anticipated in the short term. This reduction in rates could make refinancing more attractive, but financial pressure could persist until mid-2025 despite these cuts.

Refinancing option

Advantages :

• Immediately benefit from the lower rates to reduce your monthly payments.
• Debt consolidation at a lower interest rate.

Disadvantages :

• Additional costs: closing fees, penalties for breaking the contract.
• Need to pass a mortgage stress test to assess your ability to repay.

Renewal option

Advantages :

• No penalties related to ending the initial term early.
• Opportunity to shop for the best rate without additional fees.

Disadvantages :

• If rates rise, you could miss the opportunity to obtain a better current rate.
• Loss of immediate economic opportunities to save on monthly payments.

Conclusion

The decision between refinancing or waiting for renewal depends on your personal financial situation and your long-term goals. Consider tax advantages through tools like the CELIAPP and the RAP to maximize your savings. Come see me for a tailored assessment, and take into account your repayment goals and your ability to manage the associated costs.

Keeping these elements in mind, you will be able to make the right decision in light of the drop in policy rates.