Renewal Time - Should I Stay or Should I go (to a Different Lender)

RENEWAL TIME – Switching a Mortgage (to a new lender)

So there you are, grooving to The Clash and thinking 'Where did the time go?' as you are opening your mail. You then notice a letter from your bank or credit union, which is curious as that means they have paid the cost of a postage stamp to contact you. That probably will be added to your monthly bank fees. And if they are contacting you, that means they probably want money.

You open it and find out its actually not that bad - just a friendly note reminding you that your mortgage term is coming up for renewal and hey, why not stop in and renew early before rates rise? They will even disregard any fees or penalties that may have occurred because they care about you.

You get suspicious at that word 'care'. If they cared would they be charging you that $15/month banking fee? Would they charge you $100 for an NSF check when they know that you obviously don't have or else that check wouldn't be NSF?
Maybe before you decide to sign on the dotted line you should invest in a little bit of your own research; talk to a mortgage broker.


THE MORE YOU KNOW;


Did you know that over 90% of borrowers renewing their mortgage will sign for a lower rate than they originally did five years ago?

BUT

Did you know that the initial offer from their lender will be on average .30% above market rate?

AND
Nearly 70% of borrowers will not inquire if they could get a better rate?

So while you do technically pay less than previous, the bank still makes a profit of .3% more on your mortgage than current market rates because it was more convenient for you. After all, they sent you a letter and everything.


What are you missing?

Let's throw some basic math in here, because some people like math, like my ex-math teacher. I just some numbers into the handy mortgage calculator available on my website here. Grab your own mortgage statement and play along if you like.

• Take a $200,000 renewal at 3.2% = $1127.19/month -> $70,525 in interest paid over 20 years
• Same $200,000 renewal at 2.9%= $1097.48/month  -> $63,396 in interest paid over 20 years

So by accepting your bank's first (and most likely over market value) interest rate it could equate to paying an extra $30 a month/ $360 a year and adding on nearly $6000 in interest to your overall mortgage. Interest rates fluctuate daily; what was true seven days ago may not be true today. Interest rates don't wait for the mail to arrive.

That said, there are instances where it is best to just sign those papers; Perhaps you have a great relationship with your bank and can haggle for the current market rate. They know how competitive mortgage lending is and will be willing to come down if you display a knowledge of current rates.

Perhaps your employment situation has changed. Most lenders won't see the need to update their mortgage applications to better reflect you change in household income so its best that what happens in Fight Club stays in Fight Club.

 

I told YOU to put the mortgage payment in our joint account!
(I find this funny on many levels)

Brokers have a love/hate relationship when it comes to mortgage shoppers. Online sites like Ratehub tend to post best case scenarios, neglecting the intricacies of how a buyer would qualify for that 0.2% variable closed mortgage. While we all love the chance to wow you with our personalized customer service and knowledge of the industry its always discouraging to find that we were being used for leverage to have their own rates lowered, that's what we do on your behalf. I often get 'unpublished deals' from lenders that may only be around for seven days and talk with lenders that might only have an office in Vancouver or Toronto.

Remember that you are the one in power, you are the one that will be putting profits into your lenders' pockets. While in today's day and age we are often left feeling powerless, your mortgage is a gift to any lender, a sign of a profitable and secure income stream which nowadays seems few and far between.

Selling the same egg since 1963

Switching is easy; often no more is required than a void check. No legal fees, no appraisals. It's a quick and simple experience, much unlike when you first applied for the mortgage.

So why wait? Talk to a mortgage broker today (like me) and find out if spending a couple of hours with a broker is worth the thousands you will save over the course of your term and amortization.


Thanks for reading.