WEBVTT NOTE This file was exported by MacCaption version 8.0.02 to comply with the WebVTT specification dated March 27, 2017. 00:00:01.101 --> 00:00:02.836 align:center line:-1 position:50% size:37% In this video, we’re going to talk about 00:00:02.836 --> 00:00:04.705 align:center line:-1 position:50% size:43% what happens to your mortgage payments 00:00:04.705 --> 00:00:06.506 align:center line:-1 position:50% size:42% when you renew your fixed rate mortgage 00:00:06.506 --> 00:00:08.742 align:center line:-1 position:50% size:37% during a time when interest rates are rising. 00:00:09.443 --> 00:00:11.245 align:center line:-1 position:50% size:38% And, we’ll cover some of the options you have 00:00:11.245 --> 00:00:12.846 align:center line:-1 position:50% size:41% for managing those payments. 00:00:14.381 --> 00:00:15.983 align:center line:-1 position:50% size:34% First, let’s talk about what happens 00:00:15.983 --> 00:00:17.584 align:center line:-1 position:50% size:43% when you renew your mortgage. 00:00:18.185 --> 00:00:19.853 align:center line:-1 position:50% size:38% Your mortgage comes up for renewal 00:00:19.853 --> 00:00:21.588 align:center line:-1 position:50% size:43% when your mortgage term ends. 00:00:21.588 --> 00:00:24.057 align:center line:-1 position:50% size:37% The term refers to how long your rate is set for. 00:00:25.192 --> 00:00:27.794 align:center line:-1 position:50% size:41% Amortization, which is another part of your mortgage, 00:00:27.794 --> 00:00:29.162 align:center line:-1 position:50% size:33% is the total length of time 00:00:29.162 --> 00:00:31.265 align:center line:-1 position:50% size:30% it takes to pay off your mortgage in full. 00:00:32.065 --> 00:00:34.268 align:center line:-1 position:50% size:38% Say you originally chose a 5 year term 00:00:34.268 --> 00:00:36.103 align:center line:-1 position:50% size:34% and 25 year amortization. 00:00:37.137 --> 00:00:38.972 align:center line:-1 position:50% size:44% When your mortgage first comes up for renewal 00:00:38.972 --> 00:00:40.274 align:center line:-1 position:50% size:29% at the end of 5 years, 00:00:40.274 --> 00:00:42.843 align:center line:-1 position:50% size:37% there would be 20 years left on the amortization. 00:00:44.077 --> 00:00:46.280 align:center line:-1 position:50% size:39% At renewal, you will choose a new term 00:00:46.280 --> 00:00:48.315 align:center line:-1 position:50% size:40% at mortgage rates available at that time. 00:00:49.383 --> 00:00:50.984 align:center line:-1 position:50% size:41% This term, along with your new rate, 00:00:50.984 --> 00:00:53.520 align:center line:-1 position:50% size:44% mortgage balance and remaining amortization 00:00:53.520 --> 00:00:56.223 align:center line:-1 position:50% size:39% are all used to calculate your new payment amount. 00:00:57.591 --> 00:00:59.459 align:center line:-1 position:50% size:33% Now, if your mortgage is coming up for renewal 00:00:59.459 --> 00:01:01.762 align:center line:-1 position:50% size:30% in a rising interest rate environment, 00:01:01.762 --> 00:01:04.965 align:center line:-1 position:50% size:41% your new mortgage payment could be higher than what you pay now. 00:01:05.565 --> 00:01:08.135 align:center line:-1 position:50% size:44% How much higher will depend on a few factors 00:01:08.135 --> 00:01:09.937 align:center line:-1 position:50% size:34% but some of the key ones include: 00:01:10.504 --> 00:01:14.007 align:center line:-1 position:50% size:39% Your current mortgage type – whether it is fixed or variable 00:01:14.007 --> 00:01:15.609 align:center line:-1 position:50% size:36% And your new interest rate 00:01:16.310 --> 00:01:17.844 align:center line:-1 position:50% size:37% When you have a fixed rate mortgage, 00:01:17.844 --> 00:01:19.079 align:center line:-1 position:50% size:38% the higher payment could be 00:01:19.079 --> 00:01:21.348 align:center line:-1 position:50% size:34% due to the higher interest rate you are renewing at, 00:01:21.348 --> 00:01:24.251 align:center line:-1 position:50% size:39% compared to the interest rate you had before your renewal. 00:01:25.152 --> 00:01:29.289 align:center line:-1 position:50% size:42% Let’s look at an example where you start with a $478,000 00:01:29.289 --> 00:01:32.259 align:center line:-1 position:50% size:32% mortgage and a 25 year amortization. 00:01:32.259 --> 00:01:35.762 align:center line:-1 position:50% size:38% After 5 years, your fixed rate increases from 2% to 5%. 00:01:37.064 --> 00:01:39.266 align:center line:-1 position:50% size:34% As a result, your monthly payment would increase 00:01:39.266 --> 00:01:43.804 align:center line:-1 position:50% size:31% from $2,024 to $2,631. 00:01:45.072 --> 00:01:47.240 align:center line:-1 position:50% size:41% Nobody likes to see payments increase. 00:01:47.240 --> 00:01:49.009 align:center line:-1 position:50% size:31% Fortunately, there are a few steps 00:01:49.009 --> 00:01:51.378 align:center line:-1 position:50% size:34% you can take to lower the impact of changing rates 00:01:51.378 --> 00:01:52.980 align:center line:-1 position:50% size:33% before it's time to renew. 00:01:52.980 --> 00:01:55.315 align:center line:-1 position:50% size:42% You can make a lump sum payment; you can Double-Up® 00:01:55.315 --> 00:01:56.550 align:center line:-1 position:50% size:21% your payments; 00:01:56.550 --> 00:01:59.052 align:center line:-1 position:50% size:37% or you can increase your regular mortgage payment. 00:02:00.220 --> 00:02:02.723 align:center line:-1 position:50% size:40% Any of these actions can help reduce your principal balance 00:02:02.723 --> 00:02:05.592 align:center line:-1 position:50% size:41% and help lower the impact of a higher payment at renewal. 00:02:06.593 --> 00:02:08.695 align:center line:-1 position:50% size:37% In addition to these options, there may be other ways 00:02:08.695 --> 00:02:10.063 align:center line:-1 position:50% size:35% to manage your mortgage payments, 00:02:10.063 --> 00:02:12.466 align:center line:-1 position:50% size:38% depending on your personal circumstances. 00:02:12.466 --> 00:02:13.667 align:center line:-1 position:50% size:39% Some clients may be eligible 00:02:13.667 --> 00:02:15.268 align:center line:-1 position:50% size:39% to increase their amortization period 00:02:15.268 --> 00:02:16.937 align:center line:-1 position:50% size:35% to help lower the payment amount. 00:02:17.471 --> 00:02:20.440 align:center line:-1 position:50% size:41% We can help you take steps to manage your cash flow 00:02:20.440 --> 00:02:21.775 align:center line:-1 position:50% size:27% and your mortgage. 00:02:21.775 --> 00:02:23.844 align:center line:-1 position:50% size:40% Talk to an RBC advisor today!