For most homeowners in Canada, their mortgage payment is their most significant monthly expense. And unless you’re able to pay off the balance in your first time, then you’ll have to renew your mortgage.
A survey by Angus Reid found that nearly 27 percent of homeowners opt for automatic mortgage renewal when the term is up instead of negotiating for a better deal to save money. With the recent changes to the mortgage market, now is an excellent time to review your mortgage terms for a better solution that is more favourable for you and your family.
So, before signing your mortgage renewal and sending it back, here are a few tips to help you get a better deal:
Don’t Accept the First Offer
Many people assume that their bank will give them a good deal just because you’re taking the business to them, or perhaps because you’ve been banking with them for a long time. But this is never the case. There’s a good chance that they’re making you a high-ball offer in the hopes that you won’t resist. So never sign the mortgage renewal rate provided as it is.
Instead, consider whether it’s worth sticking with them, and let them know if you find better offers. A few things to keep in mind before renewing include:
- Whether you’re pleased with your current lender.
- If your lender offers you any meaningful perks, and their actual value.
- Whether you’d like to adjust your payment amount or frequency.
- Do you have the option to make lump sum payments directly to the principal.
- Can you move your mortgage when selling without incurring a penalty.
- Whether you need to consolidate high interest debt.
You should call your lender and request a better rate. They will likely make amendments to keep you as a customer, especially if you have a good credit rating.
Give Yourself a Few Months to Switch to a New Lender
If you’re not happy with your current lender, then you should start shopping around as early as possible. Generally, the renewal letter arrives at least three weeks before your term expires, which gives you a bit of time to find a new lender. However, switching to a new lender requires about two weeks to fund a new mortgage. Keep in mind that you also need to schedule meetings, gather your documents, schedule a property appraisal, and wait a while for any applications to be processed. So you need to start your search about 4–6 months in advance.
Consult a Mortgage Broker if You Intend to Change Your Lender
When you consider the hassle of finding a new, favourable lender and getting ready to switch, it is much easier to work with a mortgage broker. By virtue of their profession, they have more information and access to lenders and better rates than you can access when working alone.
Shopping around with the assistance of a professional will save you a lot in the long-run, especially if you’re aware of unnecessary items in your mortgage renewal that you can forgo to save money. Some restrictions to be aware of when considering a discount mortgage include:
- No porting option, where you can only sell the property to a stranger when moving. Selling to a family member will incur a penalty.
- No option to payout, renew early, extend the mortgage, or even refinance.
With a 5-year mortgage term, you should have enough time to consider whether you’re happy with the current arrangement, and what items you’d like to change before your mortgage renewal to avoid penalties. If you’re unsure about your next move, seek professional help.
For more information on mortgage renewals, call Northwood Mortgages at 866-307-0747 or contact us here.