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.
A study by Bank of Canada in 2011 found that existing bank customers don’t get the best deal when they renew.
People who switch and first-time buyers are getting the best deals. That’s because new customers offer banks an opportunity to sell more products and they are eager to bring that new business in.
Existing customers assume they’ll get the best deal because of their loyalty and so many don’t bother to shop around.
Lacking ammunition, the discount they get is not as much.
Many homeowners stay with their existing mortgage lender because they believe it is too time consuming to shop around for a better rate.
That is where a mortgage broker can be invaluable.
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 broker will find you the lowest rate and the product best suited to your specific needs at no cost to you.
As well, 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 will guarantee 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.
Renewal is your time 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.
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..
You may also have extra cash available—you can at this time apply it to your mortgage and reduce your mortgage amount penalty free.
You can also leave all as is and simply negotiate a better rate.
If you choose to leave your mortgagor, there is no cost involved to renew with another financial institution.
Mortgage renewal time is a great opportunity to make the changes that are reflective of your lifestyle today. We all have sharp pencils when it comes to a cell phone contract, data plans or cut rate flights and hotel deals.
But when it comes to banking, we tend to be a complacent fee–tolerant group happy to get something but certainly not the best deal that could be available to us.