Ultimate Guide to Mortgage Renewal

 
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Last updated Feb 14, 2018

New mortgage stress tests that came into effect January 1st and higher rates make it more difficult for Canadians to qualify for a mortgage. The combined two factors are also likely to result in Canadians being offered less competitive rates at renewal.
Click on these links for more information on the impact of stress tests at renewal and our forecast of rates rising in 2018 and 2019.
Follow our 5-step guide to feeling confident you got the best deal at renewal.

Step 1.    Start Early

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Start shopping for a new mortgage 6 months before your current mortgage is up for renewal. In a rising rate environment 1 week can mean a quarter percent difference in rate. Also, if your lender doesn’t have a renewal offer that fits your needs, starting early gives you time to look for another lender. You may not be able to switch your mortgage over until your actual renewal date arrives, but it’s best to give a mortgage broker time to find the best product and get all the paperwork ready, so you’re not left scrambling at the last minute. Keep in mind that one week isn’t enough time to switch, to be safe you should allow at least a month.

Step 2.    Consider Your Long-Term Plan

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Before you renew your mortgage, you should review your personal and financial goals to determine the type of mortgage you need. Key considerations:

  • Is there a chance you could get a job opportunity in the next 3 to 5 years that would require you to move?

  • Might you want to upgrade to a larger home because your household is growing?

  • Are your kids moving out and might you want to downsize?

  • Is there a chance you could get a big bonus or receive an inheritance?

If you know there’s a chance you’ll want to change homes, potentially move to a new city in the next few years, or you think you may want to pay down a big chunk on your mortgage, you may want to look for a shorter term or a lender with more favourable early repayment fees. Once you know what you want, you’re in a better position to ask your current lender for a rate, and engage a mortgage professional to look at other options.

Step 3.    Do your homework

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Information is power. Before attempting to negotiate a better deal from your current lender, find out what other lenders are offering. Plenty of websites post current rates, but advertised rates are usually only applicable to the best-case scenario (i.e., It is intended to get you to get you in the door, but you may not get the advertised rate). There are many factors that can influence the rate. Here’s what you want to look at once you know how long you want to lock in for:

  • Rate

  • Pre-payment Options

  • Early Payoff Penalties/Fees

  • Other Fees

If you speak directly to a bank or credit union, they can only give you advice on their own mortgages. Contact a Mortgage Broker if you want help to quickly assess your options and compare many lenders. Remember, there is no penalty for switching lenders at the time of renewal.
Click on this link for more information on the features of a mortgage that are negotiable and how they impact your cost of borrowing.

Step 4.    Ask for better terms

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The renewal letter that comes in the mail is almost never the best rate available. Yes, signing and returning the letter is quick and easy but you will pay for the convenience with a higher interest rate. Always ask your current lender for a better rate. Some people feel uncomfortable negotiating a better  renewal deal. If this is the case, then get a mortgage broker to negotiate with the available lenders and beat the offer in your renewal letter. Remember to keep the personal and financial objectives from step 2 in mind. You are not just negotiating the rate. You are looking for a combination of:

  • Term

  • Amortization Period

  • Rate Type (Fixed or Variable)

  • Payment Schedule Flexibility

  • Pre-payment Options

  • Early Payoff Penalties/Fees

If you take the route of switching providers, a mortgage broker may become your best friend. Rather than you meeting all the lenders, a mortgage broker can pull your credit report once and quickly identify the lenders who best fit your objectives.

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Step 5.    Let a mortgage broker do the work for you

Time is valuable. If you don't want to spend your time researching lenders, rates, and features, a mortgage broker will do the work for you.  Mortgage brokers don’t charge you anything for most types of financing since they are usually paid a commission or finders fee by the lenders. According to the research from the Bank of Canada, people who use a mortgage broker usually save more money.

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