Overtime, the mortgage switch/renewal market is much larger, and lower stress, than the purchase market. There’s no pressure, subject free offers or down payment documents to deal with. No need to worry about tight timelines, and often little competition from existing lenders.
5 Tips to a Stress-Free Renewal
Start shopping around early
Borrowers should always start shopping around about four to six months before their mortgage is up for renewal. Given the time frame, this gives option to request a rate hold for that extended period. If you do some shopping around, the lender will be able put you in a rate hold, which will protect you if rates increase. If rates go down, they’ll use the lower rates.
Check rates from other lenders
It’s imperative that you check rates given by other brokers and institutions, so you know exactly what’s out there on the market. By staying up to date with the market, this ensures that you’ll be in a better position to negotiate with your lender.
Don’t accept the posted rate
While doing some shopping around in the market, never settle for the first rate you’ll see. This leaves room for endless negotiation for what your research has shown, and will ensure you understand the market, making it simpler for your lender and or broker.
Hire a mortgage broker to help you
By having a mortgage broker by your side for assistance, this will give you the support needed to access various products that may be best suitable for you. A mortgage broker has access to multiple lenders and rates, and can shop around on your behalf, once they have a mortgage application for you.
Consider other options
Know what options are open to you, such as fixed versus variable rates, amortization periods, and flexibility of repayments. You should always be able to negotiate some benefits for yourself. There’s no penalty for moving on if not satisfied.
The Bank of Canada study found that existing bank customers don’t get the best deals when it comes to renewing a mortgage. People who switch and first-time home buyer’s usually get a better deal. This is because new customers offer banks an opportunity to sell more products, so they’re eager to bring those new clients and business in. Existing customers assume they’ll get the best deal because of their loyalty, and for that reason, they don’t bother to shop around for new rate deals.
How Does a Mortgage Switch Work?
Typically, standard mortgages have a maturity date of five years. Every five years, you can either renew your mortgage with your existing lender or switch to a new lender and continue the process. Switching your mortgage can change your interest rate, prepayment options and your payment frequency, but it won’t affect how much you pay for your mortgage.
Doing a mortgage switch to a lender with a lower interest rate can save you money, especially on your monthly mortgage payments and the amount you pay in total interest over the entirety of your loan. However, there are a few potential fees that you’ll need to be aware of before switching your mortgage.
- Mortgage discharge fee: To discharge your mortgage, also known as ending your current mortgage agreement, your existing lender may charge you between $0-$400.
- Appraisal fee: It typically costs between $150-$500 to have the property’s value accessed. Even though you’ve already paid an appraisal fee prior to when you first bought the home, you’ll need to go through this process again.
- Assignment fee: This fee covers the switch from your old lender to your new lender and can cost between $5-$395.
- Legal fee: Mortgages require legal paperwork, and a lawyer will need to complete the process. Legal fees can vary depending on the type of mortgage you have.
It is PARTICULARLY important to have a clear understanding of the implications when it comes to a stress-free mortgage renewal/switch. It makes a significant difference in future planning and can impact you in incredibly substantial ways.
At GLM Mortgage Group, we know what questions to ask. We have relationships with the lenders that you know about and the lenders you don’t. We would be pleased to educate you on the financial options available to you. We want you to make the best decision possible on the mortgage that you are committing to. Call us anytime for a FREE consultation on the mortgage products available to you.