If you have a mortgage that’s coming up for renewal, there are several things you need to know in order to make your newly-updated mortgage the best it can be. Don’t think of renewal time as a time-consuming hassle, instead…think of it as a great opportunity! Not only might you find a better interest rate and save money, it’s also a great time to re-assess your financial goals. Here are some savvy strategies to put you in the driver’s seat when it comes to your next mortgage renewal.
Before you hit reset
For most Canadians, mortgage terms typically run from 6 months to 5 years, although some can run much longer. Lenders must send you a written notice in the mail (or by email) within three weeks of the renewal to notify you that your current mortgage term is expiring. They will likely have a brand-new mortgage contract proposed for you, ready to go with a new rate, term and payment frequency outlined; all you have to do is sign it and send it back. Sounds easy, right? Don’t be too hasty though – your current lender is banking on you (no pun intended!) to sign those renewal papers, but they don’t necessarily have your best interests at heart. You should know that it’s within your rights – as well as highly encouraged – to negotiate a better rate, term, type of mortgage (such as fixed or variable) or even switch lenders if need be. While you may save time by agreeing to the proposed mortgage, you may also be missing out some serious savings or alternate mortgage options that may work better for you. The key? Start early – give yourself at least a month or even two to go through this process without the pressure of the renewal date bearing down on you.
A lot can happen within the time frame of your mortgage, such as a change in income, new additions to the family, health issues and so on. With this is mind, it makes sense that your new mortgage should reflect those changes to best suit your financial situation. In circumstances where your income has gone up, you also need to think about your financial goals. For example, you may want to increase your mortgage payments so that you pay less in interest and more on the principal, or you may want to put that extra income into investments or retirement planning.
Don’t forget about the stress test
Many people think that the recent Canadian mortgage qualifying regulations known as the stress-test only impact home buyers first applying for their mortgage. However, if you switch lenders at renewal time, you will also be subject to the stress test rules, unless you go to a credit union or other alternative lender. The stress test isn’t necessarily cause for concern, unless you’ve experienced a recent drop in income or a substantial increase in your debt. Be sure to talk with an experienced mortgage professional if you have any questions about the stress test.
Time to negotiate
Renewals are an opportunity for you to renegotiate your mortgage contract. Some people simply cringe at the thought of having to barter or negotiate, especially when working with a big corporation like a bank. Be sure to give yourself ample time before your current mortgage expires; people have far less of an advantage when they are under a time crunch. What’s important to remember is that it’s your hard-earned money you’re negotiating, and you have an important voice in this process. Your mortgage needs to align with your personal and financial goals, as well as with the real estate market in general.
Don’t feel like you have time or resources to shop around for better rates or terms on your mortgage renewal? Don’t worry, just call me. As a certified mortgage broker, it’s my job to shop for the best rates among the many lenders I work with and to collaborate with you to develop mortgage options tailored for you. Don’t forget to connect with me early; mortgage renewals don’t happen in a day. There is paperwork to complete and file, along with a few other tasks that might be needed such as a new appraisal. Give me a call at 705-315-0516. I’m here to help make mortgages easier; it’s what I do!