Mortgage Renewal Time?
If you have a mortgage, at some point it will come up for renewal (unless of course, you are really close to paying it off, and in that case – congratulations!!!). When this happens, it is important for you to know your options, so that you are not leaving money on the table or putting yourself in a situation which could cost you money down the road.
There are two primary reasons that you may want to leave your existing lender: rate being the primary one, and sometimes you may simply be unhappy with the service (or lack of) that your existing lender is providing to you.
Approximately 65% of clients will simply sign the first mortgage renewal form offered to them by their existing lender when. No questions asked. That is a mistake, and often a costly one. Don’t get me wrong, the easiest thing for you to do is to sign that form. No requalification, no additional questions, things just keep humming right along… but here is the thing: the banks are also aware of the fact that two-thirds of clients will ‘just sign’, and guess what… the higher the interest rate they can get you to pay, the more money they make.
How often do you think they will have your best interests at heart when renewing your mortgage?
Negotiating a Better Offer Upon Your Mortgage Renewal
The reality is that at the end of that term, you are indeed a free agent! Get out there and play the field. Here is how I would recommend doing that.
Ask Your Existing Lender To Come To The Table With Their Best Rate – again, there is no doubt that the easiest thing to do IS to stick with your existing lender, and if they are offering a competitive rate, then my advice will always be to stay there. However until you know what they are willing to do for you, it is difficult to determine what the best course of action is.
Call A Mortgage Broker – As a Mortgage Broker, we work with an array of lenders: big banks, credit unions, mortgage finance companies, private lenders etc. Once you have a rate from your existing lender, your Mortgage Broker will be able to run through the mortgage products that the various lenders are offering, and figure out whether or not you would save money by switching lenders. Once we are within 120 days of your mortgage coming up for renewal, if there is a better rate out there for you, we can lock it in.One other reason to avoid signing blindly is that life happens, and situations change… if you just got out of a 5 year fixed term, but have a growing family and recognize that you will likely be upgrading your home in less than two years, perhaps it makes more sense for you to consider a shorter fixed term or a variable term (where the penalty for breaking that term is only a 3-month interest penalty). A Mortgage Broker will help you to work through all of these scenarios.
A Quick Requalification – In the event that you can save money by switching lenders, it is important to realize that you will need to requalify. However, in most cases, assuming your financial situation is similar or better than what it was when you first obtained the last mortgage, this shouldn’t be a big deal. Typically, you will require the following documentation:
- letter of employment confirming position, salary, and full-time/part-time status
- recent paystub
- copy of a recent mortgage/renewal statement from your existing lender
- copy of your house insurance policy
- copy of your property tax bill ensuring payments are up to date
- void cheque or PAD form for the bank account where you would like your new mortgage to come out of
Other Points to Consider When Renewing Your Mortgage
Please recognize that every mortgage is different, and if you are self-employed, a part-time employee, own rental properties or something a little outside the norm, additional documentation may be requested, but the above list will cover the majority of the paperwork. Clearly, it may take a little bit of time to gather these documents. It is up to you whether or not you believe it is worth it.
If I can save you $5,300 (recent real-life example) over the next 5 years through lower payments and interest savings, is it worth spending 2-3 hours collecting a little information? In my eyes, you are making $1,766 per hour if it takes you three hours…. Now there are a LOT of things that I would do if I was paid $1,766/hr to do them, even if they are not my favourite! I would teach myself to snowboard. I would eat plates of raw oysters. I would shop at WalMart. And I would definitely collect void cheques and paystubs if it meant I could save that kind of cash.
When switching lenders, there may or may not be fees involved. Discharge fees, appraisal fees, ‘legal’ fees can all be part of the switching process, HOWEVER, in many cases, these fees can be covered by the new lender. Again, best to discuss these options with your Mortgage Broker, and see what they can do to save you money.
One final point about moving lenders… since October 2016 there has been a substantial rule change that has come into effect which does make it more difficult to qualify for purchasing a home today. That is the truth and there is no getting around it. However, if you are simply renewing your mortgage with a different lender, although you DO have to requalify, you are grandfathered in under the pre-October 2016 guidelines… which is great news, and ensures that you have a much better chance of being able to move lenders if it makes sense to do so.
Should you have ANY questions about your mortgage renewal or anything mortgage-related, never hesitate to give me a call at 306.201.6500 or email me at Skott@skottenns.ca