Mortgage Renewal Survival Guide

Mortgage Renewal Survival Guide

If your mortgage is coming up for renewal then there are things you need to know and questions you need to be asking.  It is really important to explore your options prior to signing the renewal letter you will be receiving from your bank or mortgage lender.  After reading this, it is my hope is that you will have the knowledge needed to ensure you are getting the right mortgage.

When you receive your mortgage renewal a lot of time there is no consideration to your current situation except for the rate.   They don’t look at your financial situation and determine what other options might be available.  A lot of circumstances may have changed since you last looked at your mortgage.  Perhaps you have received a pay increase and can now afford to pay down your mortgage a lot quicker.  Maybe you have been victim to the economy and would like to try and extend the overall length of your mortgage to lower the monthly payments.  What if you just had some unforeseen expenses and need to try and factor your extra debt in to your mortgage to save you some money?  Whatever your situation I want to make sure that you are given the best mortgage, one which will suit the needs you have today and going forward. 

When you are given a mortgage renewal chances are pretty good it is not the very best rate you can get.  It is possible that there are lenders out there which may be offering better rates and terms.  When a bank offers you a renewal rate they are assuming a lot of the time that you have no idea as to what rates are available so you may just sign without doing your research.  Banks have what is called discretionary pricing which means they have a range of rates with the best rates being the last rates offered.  When you deal with a mortgage broker you are offered the best rates all of the time.

 If you are being offered a rate from your bank that seems too good to be true, chances are it probably is.  Some financial institutions have become experts in packaging up a rate to appear more attractive.  You may find you have a blended rate mortgage which has been blended with a variable and fixed rate portion to make it appear lower.  You may think the rate you are getting won’t move when in fact it is a variable.  You may also be offered a lower term to compete with some of the other lenders longer term mortgage thus having to deal with a mortgage renewal in a more expensive time.  You may be getting a mortgage without any privileges.  I would recommend you ask the following questions to ensure you are getting the right mortgage. You may also find yourself in a mortgage you cannot get out of without the sale of your house.  If you find yourself dealing with the bank or anybody else and they cannot provide you the answers to these questions than it might be a better option to find somebody who can.

1.       Is my rate fixed or variable?

2.       If my rate is variable what happens to my payments if rates go up?

3.       How long is my rate the good for?  What is the term?

4.       Is my mortgage open or closed and what is the difference?

5.       Does my mortgage include pre-payment privileges?  If so, how much can I increase my payments by?  Can I make lump sum payments?  If so, how much and how often can they be made?

6.       Can I get out of my mortgage early?  If so, how is the payout penalty calculated?  Is it 3 months interest or is it interest rate differential (IRD)?

7.       Is my mortgage portable and what does it mean?

8.       Is my mortgage assumable and what do I need to know about it?

In conclusion there are many factors to consider when you are renewing your mortgage.  It is best to look at getting a 120 day rate hold prior to the renewal to ensure you are given the best of all possibilities.  By doing this you ensure you are not subject to any rate increases within the rate hold period.  In addition you will be given the benefit of any rate decreases.  What’s more, the majority of lender’s want your business so they will pick up the costs associated with the transfer of your mortgage so it won’t cost you anything.  In my opinion it is a far better option to work with a mortgage broker because we specialize in mortgages.  That is all we do.  Some other institutions specialize in their products and therefore may not be equipped to handle all the ins and outs of a mortgage.