As a mortgage broker, mortgage renewals and mortgage transfers is an area I spend a lot of time with. It’s important, very important. Most clients understand this, but many simply fall into the trap of “auto renewing” with their existing lenders without planning or consideration of all their requirements and options.
Yes, you will likely receive a letter, phone call or both from your existing lender (or you should). However, most if not all of these offers are simply to extend your mortgage term at the now prevailing mortgage rates for the new term of choice. They do not discuss or review your current requirements, short and long term goals and adjust the mortgage as required. More importantly, the offer you receive is rarely the best rate available. So, let’s slow this down a bit and consider.
First, never automatically take the offer provided by your lender from the onset. Statistically, most borrowers do not take the time to re-evaluate their options and shop for best rates, terms and conditions as they did an inception. Your lender “knows” this statistic very well and prices the renewal accordingly. You not only may be able to negotiate a better deal elsewhere, but likely, even with the existing lender that can be much better than the original renewal offer. Being too busy or “can’t be bothered” at renewal is never a good idea.
Second, renewal time is the time to have a look at your overall financial picture. Are you better off financially, have rates dropped or increased since you took out the mortgage, do you need additional funds for debt reduction, renovation, kids tuition, etc. Plan this out. You may be able to decrease your amortization and pay off your mortgage that much earlier. Borrowing for debt reduction could save you thousands. Not to mention, if you save .20, .30, .40, .50% on your renewal from your first offer, that would be extremely impactful as well.
Lastly, if you do need to switch lenders, in most cases you will have a no cost, no fee transfer. It’s a simple transition. If you do need to refinance to secure some extra funds, well you will incur some legal fees and possible appraisal costs but nothing in comparison to having to open the mortgage early to refinance in mid-term. I am not a fan of switching lenders for the “sake of”, however, it is important to consider all options at renewal time.
Have any questions, need any advice? Visit us at www.thefinancialforum.ca. Email us at mortgages@thefinancialforum.ca. Call us at (905) 265-0246.
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