For the vast majority of Canadians, the biggest monthly expense will be their mortgage payments. Despite that fact, many Canadians—roughly 25%—will renew their existing mortgage once the term has ended. Instead, what they should be doing is taking the time to explore the various options at their disposal. Here, we will go over some things that you should do before a mortgage renewal, which could save you thousands of dollars in the process.
The first thing you should do is start exploring your options about five months before you are up for a mortgage renewal. By doing so, you will be guaranteed a discounted rate by various lenders before time expires. If your current lender decides to increase their rates, then you can fall back on the guaranteed discounted rate.
However, if your current lender were to drop their rate, then you negotiate a lower rate and stick with them for your renewal; you will have more leverage when your current mortgage term ends.
Do Your Homework
We would strongly advise that you find out what other lenders are currently offering their clients before you try and negotiate a lower rate with your current lender. In fact, many websites provide the most recent rates offered by various banks and private lending institutions, so you can compare and contrast rates before you begin negotiating with your current bank.
Never Settle for the Posted Rate
Many Canadians make the mistake of simply accepting the posted rate of their bank. Instead, if you are satisfied with the policies, financial advice, and mortgage features of your current lender, then ask them to match the lower rate of one of their biggest competitors. More often than not, most banks will match the lower rate, as they realize that competition is fierce, and they do not want to lose you as a customer.
Don’t hesitate to ask them to lower their rates, as most will not lower their rates unless you bring up the issue. Your bank might be more willing to lower their rates if you transfer some of your investments and accounts over to them, such as your RRSP.
Don’t Fixate on the Interest Rate
Another common mistake that many homeowners make is fixating on their interest rate as the be-all-and-end-all. They should focus on the payment schedule’s flexibility, as well as the amortization period, and whether the rate is variable or fixed. In fact, all of the above will influence whether your rate will be lowered or remain the same, so they should be given equal credence.