It's time to Renew your mortgage, now what?
So, the time has come and your term has ended in your mortgage and now it's time to renew your mortgage.
A. sign the papers the bank sent you and send them back? or
B. TALK TO YOUR MORTGAGE BROKER.
Can you guess what the answer should be? A switch from lender to lender at renewal time is free, and a consultation with your broker is definitely free, yet many Canadians simply sign their mortgage renewal papers. Almost two out of three Canadians surveyed stayed with their current mortgage provider and didn’t negotiate, which potentially means they're paying thousands more in interest then they have to be.
If you are renewing your mortgage, here are some things to keep in mind before you sign that document.
The posted rate isn’t the best rate.
Banks use the posted rate to provide a value proposition to their clients. They often start with the posted rate and then offer discounts to preferred clients. Consumers need to educate themselves and shop around. Even if you get the secret or discounted rate, if you only get rates from one financial institution, you may still be paying a premium compared to other lenders. This is why using a broker is advantageous. For one, we don't get paid more if you have a higher rate, unlike banks who's profits depend on the interest you pay. A broker will offer the best rate they can find up front, you don't need to negotiate and there is no such thing as "preferred clients", ALL my clients are preferred. Banks know customers trust them they play on that a little bit, offering the posted rate and leave it up to the borrower to negotiate and ask for preferred rates, rather than offering them up front.
Being good and loyal to your bank makes no difference to your rate
Are you paying down your mortgage and cutting years off your amortization? That’s great but it won’t make a difference when renewing your mortgage.
Are you a loyal customer? Have you been with your bank for years and do everything with them? That also doesn’t count when it’s time to renew your mortgage. A 2011 Bank of Canada paper found that loyal customers may not get as good a deal with their bank as they would if they went to a different bank as a new customer. So if you’re looking for a better deal, considering going to a different lending institution.
Check the terms before you sign
The cheapest rate may not be the best rate so always read the small print before you sign. Make sure the rate you choose offers other options such as the ability to pay extra on your mortgage and clearly defines any penalties should you decide to break your mortgage early. This is so important. No one reads the fine print, or most don't understand it. This is why an experienced broker is again so important. I understand the fine print, I know when a super low rate isn't actually the best for you, or if it is. And if it comes with a different penalty, or a strange clause in it, I will make sure YOU understand it, before you sign it. Remember, it's in my best interest to make sure you're happy. I want you to come back to me when your mortgage is due for renewal. I want you to tell your friends. I've said it before, I WILL tell you when its best for you to sign those papers the banks given you. Again, my service is free, my advise is free, why not see what I can get for you when your mortgage is up for renewal?