Is Your Mortgage Still Optimal?
Market conditions and your personal situation constantly evolve. A mortgage that was perfectly suited two or three years ago may no longer represent the best option today. This self-assessment helps you identify the signals that indicate it is time to take action and optimize your mortgage situation in Quebec.
The five warning signals to watch
Several concrete indicators can reveal that your mortgage is no longer at its optimal level. Each of these signals warrants thorough analysis, as it may represent substantial savings if you act at the right time. Here are the five most important signals to check regularly.
- Rate gap of more than 0.50% with the current market: if negotiated rates through an AMF broker are significantly lower than your contractual rate, a break analysis or renewal planning is warranted
- Loan-to-value ratio dropped below 65%: your property's appreciation and your repayments may have reduced this ratio, giving you access to preferred conditions reserved for low-risk borrowers
- Significant income improvement or debt reduction: a salary increase, car loan payoff, or elimination of credit card debt improves your GDS and TDS ratios, strengthening your negotiating power
- Changes in OSFI policies or Bank of Canada rates: a rate cut or relaxation of qualification criteria can create new opportunities for existing borrowers
- Term approaching maturity within 6 months or less: the pre-renewal period is when you have the most negotiating leverage, as your current lender wants to retain you and competitors want to attract you
How to perform your self-assessment
- Gather your documents: Pull out your mortgage contract, your latest annual statement, your municipal assessment notice, and your recent pay stubs. These documents contain all the data needed for an objective comparison.
- Compare your rate to market rates: Contact an AMF-certified broker to get current negotiated rates. Compare identical terms: 5-year fixed versus 5-year fixed, variable versus variable. A gap of more than 0.50% justifies a detailed analysis.
- Calculate your current loan-to-value ratio: Divide your mortgage balance by the estimated market value of your property. A ratio below 65% is excellent and opens access to the best market conditions.
- Evaluate your debt ratios: Calculate your GDS (housing payments divided by gross income) and your TDS (all debts divided by gross income). If these ratios have improved since your last loan, you are in a stronger negotiating position.
- Identify the best strategy: Based on your results, the optimal action may be to wait for renewal, break the current term, increase your prepayments, or refinance to consolidate debts. An AMF broker recommends the best option.
When to act and when to wait
The decision to act depends on your break-even point, which is the number of months needed to recover the break penalty through monthly savings. If your term expires in less than 18 months, it is often more profitable to wait and negotiate aggressively at renewal. If your term is still long and the rate gap significant, breaking can generate substantial net savings. An AMF-certified broker analyzes your complete situation, including the exact penalty, refinancing costs, and projected savings, to recommend the best optimization strategy tailored to your profile.