Mortgage lenders send out renewal statements as your loan term nears an end (the most common term is five years). Your lender must send a 21-day notice before your mortgage term ends.
To ensure that you take full advantage of your mortgage renewal, here are our top 10 tips:
1. Conduct your own research on rates
If you compare your current rate with what other financial institutions are offering, you will know how much leverage you have (since you will have leverage; see tip #2).
2. Postings are rarely the “lowest” rates
The goal of a bank is to make money. The posted rate is the one that the bank wants to sell you (so that they can profit the most on the interest you pay).
However, it is usually easily negotiated down, so be open to negotiating.
3. Low rates aren’t always best
A cheaper mortgage doesn’t mean better. Be sure to check what penalties come with a cheaper mortgage.
For example, can you make extra payments if you accept the lowest rate? What are the fees associated with choosing to end your mortgage early?
4. Keep payments the same if you get a lower rate
It might seem silly to negotiate a lower rate only to have the same recurring monthly payment. It’s unlikely that lower monthly payments will increase cash flow much.
Keep the same monthly payments, however, and at the new lower interest rate, you will reduce your overall amortization and pay off your mortgage quicker.
5. Add a little extra to the principal
A lump-sum payment at renewal time is perfect since there is no pre-payment limit. You can save in total interest costs because every dollar goes to paying down the principal.
Make a lump-sum payment at mortgage renewal if you have extra cash to spare at this point.
6. Use equity to finance goals or projects
You can invest money toward your principal if you have the money to spare. If you don’t, you can leverage your home equity to fund projects and needs.
If you’re planning home renovations, consolidating debt, or renewing your children’s college education, then now is the time to refinance.
7. Consider switching to a broker
A Bank of Canada study found that brokers are able to get mortgage rates lower than large banks, as they have access to multiple lenders with competitive quotes.
If your loyalty is to your bank, then remember this: the same Bank of Canada study found that you may not get the same deal you would get if you approached a new bank.
8. Don’t be afraid to switch lenders
If you switch lenders, then you might need to pay a large discharge fee. However, don’t be discouraged by it.
The discharge fee will usually be rolled into the new mortgage. Getting a mortgage with a better interest rate or more flexibility can be as simple as paying a small fee.
9. Don’t leave your renewal to the last minute
Begin the process at least four months before your renewal date. Be sure to do your mortgage homework.
If you’re well-prepared before renewal, you’ll be in a better position to decide whether to renew with them or go somewhere else.
10. Ask for educator-specific advice
In order to find the best mortgage based on your personal needs and budget, Northwood Mortgage can offer you services whether you are shopping around for your first mortgage, about to renew your existing mortgage, or considering purchasing a second home.
If you’re planning for a mortgage renewal in Toronto, or if you’re simply looking to consult real estate mortgage experts about your potential future home, you can visit Northwood Mortgage. You can call us at 888-495-4825 or contact us online