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Mortgage rates are finally starting to decline. 

Whether you’ve just bought a home or your mortgage is up for renewal, you need to act now. 

But here’s the dilemma: choosing the lowest rate may not always be the smartest move. 

Strategy is the key to maximizing your savings and minimizing risk. 

The right approach depends on your financial situation and risk tolerance. 

Below are three strategies I offer my clients to win in a falling rate environment.

Now, let’s dive in.

For most people, the rate conversation ends when they apply for a mortgage or when their lender reaches out for renewal and they sign the offer. 

This can happen as much as four months before the mortgage actually closes, and during this time, rates can move up or down. 

But with my rate protection strategy, this is where the real opportunity begins.

The rate protection strategy tracks interest rates, the economy, and lender offers from your mortgage application until your closing or renewal date. 

If a better rate is available before closing, you can request a lower rate.

This could save you thousands in interest.

Here’s the hard part: your lender likely won’t notify you of these opportunities. 

This is where working with an independent mortgage broker comes in. 

I’ll keep an eye on the market and work with lenders who allow us to update your rate to the most competitive offer.

The best part? 

This strategy works in every situation.

It applies to buying a property, renewing a mortgage, or refinancing. 

And even better, you can stack this strategy with the two below for the greatest savings.

History shows that when rates start to drop, variable-rate mortgages tend to be the best option. 

Why? 

You get to ride the wave down as rates fall. 

And when you feel rates have bottomed out, variable-rate mortgages in Canada allow you to lock into a fixed rate at any time, without penalty.

This gives you flexibility. 

If you’re okay with higher payments at first and can take some risk, this option lets you benefit from falling rates.

Most importantly, it lets you lock in when you feel things have bottomed out. 

In short, you ride the wave down and lock in when rates reach a place where you’re comfortable for the long term.

If you need a fixed rate but want to adjust as rates drop, the Mortgage Cascade Strategy could be ideal. 

This strategy lets you lock in a fixed rate.

But it gives you flexibility to lower your borrowing costs over time.

Here’s how it works:

You take out a fixed-rate mortgage and also set up a Home Equity Line of Credit (HELOC) alongside it.

Each year, you use the HELOC to pay down your allotted portion of your mortgage.

As rates fall, you transfer that balance into a new fixed-rate mortgage at a lower rate. 

This creates a cascade of mortgage components.

It lets you lower your overall rate over time.

Example:

Let’s say you have a $500,000 mortgage at 4.94% for a 5-year fixed term, and you also have a $100,000 HELOC. 

At the end of year 1, rates are 4.5%. So, you use the HELOC to pay off $100,000 of the mortgage. 

Then, you move that amount into a 4-year fixed at 4.5%.

At the end of year 2, rates drop to 4%. So, you repeat the process. 

You pay off another $100,000 and move it into a 3-year fixed at 4%.

At the end of year 3, rates drop to 3.5%. 

So, you repeat the process, paying off another $100,000 and moving it into a 2-year fixed at 3.5%.

As a result, your cumulative rate is now 4.64%, a full 0.30% lower than what you initially signed on for. 

And, you still have access to the HELOC. 

This strategy is best for those who need fixed payments.

Most importantly, it’s for those who don’t mind managing their mortgage.

It suits those who want to take advantage of falling rates and qualify to add a HELOC to their mortgage.

In a falling rate environment, a good strategy will win over a low rate.

The key is to protect your rate and tailor a plan to your risk tolerance.

Whether you prefer a variable rate’s flexibility, a fixed rate with the Cascade Strategy, or the best deal from application to closing, there’s a solution for you. 

Reach out to explore which strategy fits your needs best!