If you have a mortgage, chances are unless you win a lottery (cha-ching $$$) you’ll be doing a mortgage renewal when your current term has finished.
While most Canadians spend a lot of time, and expend a lot of effort, in shopping for an initial mortgage, the same is generally not the case when looking at mortgage renewals.
So what is a mortgage renewal?
Mortgages are amortized* over a set term* which can vary from 1-10 years.
About 6 months before the end of your term, your current lender will suddenly become your “Best Friend” showering you with attention and trying to entice you with early renewal offers… Please, please, please Mortgage borrower, sign here on the dotted line to renew… it’s sooo easy!!
You have 3 options
Sign and send back as is (don’t do it, really I mean it… don’t do it!!)
Check the market to make sure you are getting the best rate and renegotiate with your current lender
Talk to your friendly neighbourhood Dominion Lending Centres Mortgage Professional and together we can discuss the best options available for your situation.
Lenders know that 80% of people will sign their renewal forms, because it’s easy. Banks & Lenders are a business and as such they want to make the highest profits to keep their shareholders happy. As an educated consumer, you need to take the time to ensure you are being offered the best possible rate & terms you can get. Remember all those hours of research you did regarding lenders and mortgage rates when you were buying your first home?
Yes, signing the renewal document is easy, however, it’s in your best interest to take a more proactive approach. Money in the lenders pocket comes directly out of your pocket… so its time to get to work!
5 steps to save you money on your mortgage renewal
Receive the renewal offer from your current mortgage lender and examine immediately, which gives you enough time to make an informed decision.
Do your research via the internet and phone calls to find out about current rates.
Phone your current lender and negotiate!
If your lender will not offer you a better rate then it’s time to move your mortgage. YES, you will have to complete a mortgage application and gather documentation, just like you did for your original mortgage.
Take a look at your budget and see if you can increase the amount of your mortgage payments above the mandatory payments and save money by paying off your mortgage quicker.
Your mortgage is one of your biggest expenses. For this reason, it is imperative to find the best interest rates and mortgage terms you possibly can.
As you can tell there is lots to discuss about mortgage renewals.
To save money, call a DLC mortgage broker to help you shop your mortgage around at renewal time.
Policies are always changing, and when you port a mortgage, a FULL application must be approved and completely underwritten with full, credit, income, property and policy review.
It’s a mistake to believe that just because you already had a mortgage, you will easily get a new one. Policies and rates are changing rapidly and you need a strategy to stay informed. SO BEFORE you consider a move, understand the worst case scenario of what you qualify for without porting your mortgage so you avoid disappointment of falling into the 70% of people that don’t end up porting. Mortgages can be made simple, when you are empowered with relevant information relating to the current market and your life stage. Depending on those factors, you might be happy to get rid of your old mortgage and get in with the new! We have a mortgage for that, and can help. On average less than 3% of mortgages are portable.
Let me list a few of the reasons why
1. Dates– most lenders have a different policy on the dates that will allow to port the mortgage; it can be weeks or months. Your closing date will determine that.
2. Amortization– porting a mortgage means you port the same amortization, so if you are moving up the property ladder, that may mean your payments are significantly increased making it less affordable or meaning you can’t qualify with your income.
3. Amounts– some have a 10% variance limit up or down, where the penalty will trigger or it’s no longer a fit within the policy.
4. Change in credit– depending on the credit score and outside debts you have will determine if you still fit the credit profile your previous mortgage had.
5. Income– if there has been a change in your income type or amount this will also impact the options.
6. Property type– some lenders only lend on single-family homes, or a particular zoning, or don’t do private sales- even if they did when you originally got your mortgage with them.
7. Rate– maybe the change in rates either way of the product type you took doesn’t allow for a port due to one or a few of the combined factors. For example, going from insured to uninsured comes with different policies.
8. Product– maybe the product you had no longer exists for your particular profile.
9. Inspections – maybe the lender approved it initially but after your inspection just as you wanted a reduction in price, they decide they are no longer going to lend on it or decide it doesn’t fit the profile or they wont do it under that program ( instead you need a purchase plus improvements or a hold back they may or may not participate in and maybe want a different fix that you or a strata council agree on.)
10. Bridge – if you want to buy before you sell, all the above factors come into play. Maybe the original lender doesn’t allow the length of time you need, there cost to bridge is much higher, or maybe they don’t approve that portion of the loan, which puts you back at square one.
Purchasing a home is complex, with many moving parts and needs to be understood as such. When you have an experienced Dominion Lending Centres mortgage broker by your side while lots of things can come up, we can guide you through what is best for your family, which is why we encourage you to be educated, and empowered so you are ready for your next part of your ownership journey.