I’ve been working as a mortgage broker in Burlington for many years. One of the things I deal with quite regularly is mortgage renewals. It’s a topic that can be a bit confusing for homeowners so I have a few tips for when it comes time for you to renew yours.
Recent Changes
You will normally get a letter from your lender when your mortgage is up for renewal. This is generally every 5 years or so. Some homeowners get excited around this time because it means they can look for a lower rate mortgage package and save some money. However, the recent changes in Canada’s mortgage stress test have made things a bit less exciting for some.
Until recently, the mortgage market offered a lot of options for homeowners and homebuyers to choose from, giving them the upper hand. Now, however, the financial institutions have the upper hand and there are fewer options to choose from. So, how can you get a good deal on a mortgage in this market’s climate?
Moving Your Mortgage
If you want to beat having to go through the mortgage stress test, and you’re happy with your current mortgage package, all you need to do is sign the renewal letter from your lender and send it in. Your renewal letter shows you what your new interest rate is and how much your monthly payments will be.
The downside with this option is that you have no room for negotiation. If you choose to look elsewhere for a better mortgage package, you will need to go through that mortgage stress test again. This isn’t a problem if you have good credit though and shopping around for a better package can save you money in the longer-term. You can also ask your lender to match any rates that you are offered.
Do Your Research
It’s always a good idea to look at what other financial institutions are offering compared to your current lenders offer. Take note of whether current mortgage rates are lower or higher than what you have, giving you some room to negotiate.
Rates
You will see a lot of posted rates by banks, but this isn’t necessarily the lowest rate you can get. This is just what they want to give you so that they can make the best profit from your interest rate. Again, this gives you room for negotiation.
Also, keep in mind that the lowest rate out there isn’t always the best. Read that fine print for any penalties you may incur with that low rate offer. You may be getting a low rate but will be penalized for making extra payments.
Keep Payments the Same
Some people will want to get a low rate and reduce their payments. However, if you want to pay off your mortgage faster, take the low rate but keep your monthly payments the same.
The Principal
If you want to make a lump sum payment on your mortgage, renewal time is the best time for it. This is because you won’t have any pre-pay limitations. You can pay down your principal, save on interest costs, and make a more noticeable dent in your amortization.
Switch to a Mortgage Broker
As a mortgage broker in Burlington, we can usually get you a lower mortgage rate than you would get from larger banks. This is because we have access to a large pool of lenders giving a variety of quote options. Mortgage brokers are there to help you get the best deal possible, whereas banks are just looking for profit. The best place to start is with one of our mortgage brokers in Burlington. So don’t sign off on that renewal right away if you aren’t happy with the new rates. Give us a call!
