Of Prime Interest: Get going when it’s time to renew your mortgage

It's in your best interest to review the terms of your mortgage renewal. Now's the time to shop around.

  • Aug. 7, 2014 11:00 a.m.

Is your mortgage renewing?

Each mortgage has a specific term, meaning you were guaranteed a rate for a set period of time.

When a term is coming to a close, most banks will send you a mortgage renewal notice. Mortgage renewals are one of the most neglected decisions made during the life of a mortgage. Many homeowners stay with their existing mortgage lender because they believe it is too time consuming to shop around for a better rate.  Rates available to a mortgage broker are often as much as 1.7 per cent below the banks posted rate—that calculates into a savings of over $250 per month based on a $250,000 mortgage—over a five- year term that’s $15,000 you will save.

A mortgage broker will find you the lowest rate and the product best suited to your specific needs. In addition you can be pre-approved up to four months prior to your mortgage coming available for renewal.

This is the best of both worlds for you—a pre-approval guarantees you the rate for up to 120 days and if the rate goes lower during that period you get the lower rate.  A win win situation for you.

What is involved with a renewal”

Renewal is your opportunity to make changes with your mortgage and not incur a penalty for doing so. You can, at this time, increase or decrease the mortgage amount, choose a new payment frequency, change your amortization or the type of mortgage you have.

The various types of mortgages available are fixed terms (six-month to 10-year terms), variable rate mortgages or a line of credit.

As an example: If you are in a fixed rate product you could at this time easily switch to a variable rate mortgage or line of credit or vice versa. If you have any high interest loans or existing credit card debt,now might be the time to pay them off and include them in your mortgage.

If you are increasing your mortgage at renewal, lenders will take into consideration your credit history, annual income, employment history and property value  to determine your qualifications.

You may also have extra cash available—you can at this time apply it to your mortgage and reduce your mortgage amount.

You can also leave all as is and simply negotiate a better rate.

If you choose to leave your mortgage as is there is no cost involved to renew with another financial institution.

If your situation has changed since you initially negotiated your mortgage there are also financial institutions that do not require you to qualify at renewal, provided you have a good credit history.

Mortgage renewal time is a great opportunity to make the changes that are reflective of your lifestyle today. A mortgage broker will enhance this opportunity by securing you the best rate available and the product most suited to you.

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