5 Things to Consider Before Renewing Your Mortgage
Friday Oct 23rd, 2020
Many Canadians renew their mortgages without asking questions or doing their research, which often leads to paying a higher rate on a mortgage product that doesn’t suit their needs. But, if you are nearing your time of renewal, it pays to do your due diligence so you get the best financing offer and mortgage agreement that works for you.
Before you renew your mortgage, here are five things to consider:
Don’t wait until the last minute to act on your mortgage renewal. Instead, plan ahead by reviewing your needs at least four months before your renewal date. This should include assessing your current financial situation, researching interest rates from different lenders and educating yourself on available mortgage products. If you are thinking about refinancing to renovate your home, invest in another property or consolidate debt, it’s important to know this before you renew.
Different financial institutions and lenders offer a wide array of mortgage products with various features and interest rates. Meeting with a mortgage broker can also help you find the best financing offer to suit your needs. Just be aware that renewing your mortgage with a new lender is considered a new mortgage altogether. You will have to go through a full application process, which involves proving your income and completing a credit check.
Negotiate a lower rate
Many mortgage holders aren’t aware that they can negotiate a lower interest rate with their current lender come renewal time, but this is a simple way to secure the best financing without having to undergo the entire application process. When negotiating your interest rate, provide your lender with any competing offers that you have received from other financial institutions or mortgage brokers. Your lender might match or beat the offer to retain you as a customer. If they don’t, you are not obligated to remain with your original lender once your mortgage term expires.
Be aware of fees
If you do choose to switch lenders when renewing your mortgage, you may be subject to additional fees, such as new lender set-up fees, appraisal fees to assess your home’s current value, mortgage loan insurance premiums and the like. If you are getting a better financing offer by switching lenders, these fees are usually minimal when compared to what you will save on interest over time. If requested, some lenders might even include discharge fees in the new mortgage or cover some or all of the fees to earn your business, so it’s worth inquiring about.
Consider your payments
If you can secure a lower interest rate by remaining with your current lender or switching to a new one, consider keeping your monthly payment the same. This will help you pay your mortgage down faster, which will save you a great deal of money over time. If you can comfortably afford to increase your payment amount or frequency, this is something else to consider come mortgage renewal time.
Remember: taking a back seat when renewing your mortgage can cost you more money in the long run. Be proactive and gain control of the situation by starting early, doing your research and negotiating the best deal. The more informed you are, the better your decision will be.
If you need advice on renewing your mortgage, a realtor is a knowledgeable resource to tap into. To learn more, please contact me, Deborah Clerk, Real Estate Sales Representative and ASA at Keller Williams Realty Associates, Brokerage, in Mississauga, Ontario, to discuss your mortgage renewal questions and options.