Mortgage Renewal – Get the Facts!
I talked with a client recently who had received her mortgage renewal in the mail. Her initial plan was to sign it and send it back. For her, this was the easiest and simplest thing to do. However, instead she decided to contact me. As I talked with her it became apparent her financial needs had changed. However, they still owed on their home but their 5 years term was coming to an end. I advised her to remember every mortgage renewal offers an opportunity to re-assess your current mortgage and re-visit your financial goals. My suggestions to her and each of you is as follows:
1. Know Your Renewal Date
It is easy in today's busy world to lose track of time and money. If we are unprepared when the notice arrives we tend to sign it, return it, and not really think about what other options are available or what our goals are at the present time.
2. Start Watching 3 Months In Advance
I would suggest you place your renewal date in your phone, on your computer, or another appropriate spot to remind you 3-4 months ahead of your renewal date. Generally, this is when you will receive a call from your current lender to start the early mortgage renewal process. What does this mean? It means you can renew early with your current lender without paying a penalty. If you are not prepared to sit down with your lender at this point, I suggest you start looking at your options. Ponder some questions such as: What is being offered? What are the interest rates? What terms are available? What alternatives are available. And any other questions arising specific to your individual requirements. This information will equip you to negotiate with your current lender when you are ready to renew.
3. Are You Where You Want To Be?
Let's be honest: A lot can happen during a mortgage term! Your beginning mortgage plans may not match your goals today. Maybe you added more children to the family; thus, a goal of paying the balance off as quick as possible may now be making it difficult to make ends meet. Or possibly your house is just too large and you are thinking of downsizing in the next couple of years. Whatever your goals might be, they are what will help you determine the rate, term and products best for you.
4. What Are Your Needs
Do you maintain a monthly budget? If so, does it allow you to increase your mortgage payment? Are you aware of your prepayment options? Will you, knowingly, receive a bonus, inheritance or other form of payment in the foreseeable future - one that you could apply against your mortgage? Do you know the annual lump sum payment allowed on your mortgage? Do you think you may need or want to borrow more funds for the next term? Will you be selling in the next five years? Do you know if your mortgage is portable or assumable?
5.When Is It Time To Start?
Ontario law states: Lenders must send mortgagees a renewal statement at least 21 days before the current term expires. However, they will usually include a renewal offer at their lowest possible rate. But you need to have done enough research to know whether or not it is actually the best mortgage rate on the market. If it's not in line with market rates you can negotiate with your lender. However it is unlikely they will offer you their best rate at this point. In the last 30 days of your mortgage term, I suggest you make an appointment with a mortgage agent. The purpose of this is to discuss what other lenders can offer you. It is our job, as a mortgage agent, to work for you, not the lenders.
6. Decision Time
You have done your homework; revisited your financial goals; thought through what your mortgage needs are; and received your renewal from your current lender. Guess what - It's Decision Time! The final question to ask yourself is this: Who is offering me the best mortgage rate and products? If you decide to stay with your current lender you can send in their form. But better still - sit down with your current lender and attempt to negotiate a better deal.
If you decide there is a better option out there - switching lenders will require a little more paperwork. However you will find that doing the extra work will give you access to better mortgage rates and products.
What Steps Does This Entail?
- Sitting down with a mortgage agent to complete a mortgage application;
- Meeting the criteria of a new lender;
- Paying the fees involved with a switch (these include appraisal, legal fees and discharge fees).
But know your mortgage agent will be there every step of the way to help, assist and direct you. Also, when your next term comes up for renewal not only will the current lender send you a letter 30 days ahead of time but your mortgage agent will also send a reminder. It will arrive 90-120 days before the mortgage expirers. The agent will be ready and willing to help you begin the process of reviewing and researching once again.