When Should You Begin the Mortgage Renewal Process?
When Should You Begin the Mortgage Renewal Process?
The mortgage renewal process from your Trusted Mortgage Knowledge Professional
The mortgage renewal process is something that everyone with a mortgage needs to be fully aware of. If you have a mortgage agreement, then you are required to receive a renewal statement from your lender at least 21 days before the end of your current mortgage term.
Did you know that many people simply sign on the dotted line, without shopping around for a better rate? A Manulife survey found that almost two out of three Canadians surveyed stayed with their current provider and didn’t even try to negotiate.
I understand that people are busy; however, it is important to understand how much a percentage point can affect the total amount you pay over the lifetime of your term. Just a few tenths of a percentage point could mean thousands of dollars less in your pocket.
If you are renewing your mortgage, here are a few things to keep in mind before you sign the renewal document.
When should you begin shopping around?
It is never a good idea to wait until you receive the renewal notice from your lender to begin shopping around for a better rate. The banks send these notices so close to the renewal date to deter people from shopping around. However, being proactive can help you to save a significant amount of money. I recommend beginning to shop around four months prior to your renewal.
The posted rate isn’t necessarily the best rate
Always think of the posted rate as the opening offer in a negotiation. Banks often use the posted rate to provide a value proposition to their clients. It is a better idea to shop around. If you only get rates from one financial institution, you may be paying a premium compared to other available rates in the market. A trusted mortgage knowledge professional will be able to help you negotiate with your current lender. It is important to do some legwork with a mortgage broker to ensure that you are getting access to the lowest interest rate possible.
Bank or mortgage broker?
A broker is an independent licensed mortgage specialist who negotiates with a variety of lenders to get their clients the best possible rate. Mortgage brokers can offer a better rate than the bank due to their access to multiple lenders. A Bank of Canada survey found that using a mortgage broker resulted in many Canadian’s getting a lower rate than what was offered by their bank.
Review the terms before you sign
As with any agreement, always read the small print before you sign. Make sure the mortgage product you choose offers other options such as the ability to pay extra on your mortgage and clearly defines any penalties, should you decide to break your mortgage agreement early.
If you don’t take the time to be proactive, then your mortgage will be automatically renewed after the 21-day period passes.
If you have any questions or if you want to begin shopping around well before your renewal notice arrives, get in contact with your local Port Coquitlam Trusted Mortgage Knowledge Professional, Milka Lukacevic of the TMK team.
Variable vs. Fixed Rate Mortgage
Variable vs. Fixed Rate Mortgage – Which should you choose?
Professional advice from your Trusted Mortgage Knowledge Professional.
What is a fixed rate mortgage?
A fixed rate mortgage is usually set over a term of 1, 3, 5 or 10 years. During the length of the term, the rate you first sign with will be the rate you pay throughout the entirety of the mortgage. In other words, there will be no surprises along the way. You will have a permanent rate with a payment that won’t fluctuate.
Normally, the fixed rate is higher than the variable rate, with very few exceptions. In Canada, the fixed rate itself is determined by Canada Bond yields. These yields are driven by economic factors such as unemployment and inflation.
What is a variable rate mortgage?
A variable rate mortgage is also set over a term of 1, 3, 5, or 10 years; however, it is priced at a lower rate. Why? Because if you decide to sign on for a variable rate mortgage, you are taking on more risk.
Unlike fixed rates, variable rates can change over the term of your mortgage. While this change may be a decrease in rate, it could also be an increase. Variable rate mortgages are also driven by economic factors. But in this instance, your rate isn’t secured. Rather, variable rate mortgages are driven by the prime rate. It is common for the Bank of Canada to reduce rates when the Canadian economy needs stimulus. On the other hand, they will raise the rates when the Canadian economy is thriving as a way to control inflation.
In a perfect world, we would be able to know ahead of time if the variable rates will increase, decrease or stay the same. But unfortunately, this isn’t the case. So now you must ask yourself:
“If the rates increase, will I still be able to afford to pay off my mortgage every month?”
When it comes to mortgages, there is no one-size-fits-all solution. One mortgage rate may look very attractive at the moment, but if you’re unsure how to navigate through all the possibilities, be sure to talk to a Trusted Mortgage Knowledge Professional. Contact Milka Lukacevic of The Mortgage Centre TMK Team, your local Tri-Cities Mortgage Broker.