Renewing Your Mortgage 101
Renewing your mortgage is a seemingly elusive event that even the most sophisticated borrowers tend to mess up. The banking system, at large, is designed to maximize profits and a borrower’s ignorance can certainly facilitate this. Routinely, the renewal options presented may, or may not, be intentionally specious. As such, it’s crucial that you are educated in terms of what’s available to you.
Renewing With Your Current Lender
This, undoubtedly, is the option that most borrowers are aware of, for better or for worse. When renewing your mortgage, you can simply sign on the dotted line with your current lender and carry on. This tends to be where most borrowers lose. Empirically, banks have offered higher rates to maximize their profits, a mendacious strategy used both repeatedly and successfully. This does not imply that renewing with your lender will always result in a loss, but rather it brings awareness to the fact that other options exist and must be explored prior to, well, just settling.
Switch/Transfer To A New Lender
Canadian banks, for the most part, allow you to transfer/switch your renewing mortgage between institutions without incurring fees. The latter assumes, and requires, that you’re not changing any material part of the mortgage; specifically, your mortgage balance, remaining amortization and listed borrowers. Often you’ll have an opportunity to secure a better rate or product depending on how your original mortgage was structured and the amount of equity currently available in your property. The interest savings can be substantial.
Refinancing Your Mortgage
When renewing your mortgage, you’re the equivalent of a free agent in sports. If you’re looking to make a material change, now’s the time to explore your options. Examples include, but are not limited to, increasing your mortgage for renovations, investment, debt consolidation, lowering your monthly payment, etc. Refinancing your mortgage, which most people often forget or are unaware of, is considered a renewal option as well.
The bottom line is that you have options when renewing your mortgage. It’s reckless, frankly, to just sign on the dotted line. That said, exercise caution when exploring alternatives and seek out advice from reputable brokerages and lenders. Ostensibly great rates found online need to be closely scrutinized. There have been significant changes in the way bank’s price and securitize mortgages; as such, advertised rates are worthless without knowing the specifics of your renewing mortgage profile. Also, be aware of egregious disclosure with respect to atypical rate clauses and stipulations that can negatively impact your options in the future. Don’t be fooled.