Mortgage Renewal – Best Rates, Process and Things to Consider

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Mortgage Renewal Tips & Advice

Considering that the current national average home price is just over $500,000, a substantial section of your monthly household budget might go towards paying off the mortgage. However, with some smart thinking, you can get more economical rates and favorable terms and conditions with the renewal process. Use these tips before you sign the renewal offer you receive in the mail.

Start Shopping Early

Should you choose to renew the current mortgage, you can complete the process in the 120 days before the mortgage term ends. You won’t incur a penalty for breaking the mortgage, but you may also not receive the best mortgage rate and product available in the market. Instead of signing and returning the renewal letter, you might want to do your homework and scout around for the best offers available. Check online or consult a mortgage broker before the mortgage end date.

You Can Ask for a Better Rate

Close to the end of your mortgage term like in the last 30 days, your lender is likely to send you a renewal letter by mail. The letter will likely include a discount of 0.75% off on the existing mortgage rate you’re already paying. A very convenient option is to simply sign the letter and send it back to maintain your mortgage. But, by accepting it, you could pay an interest rate that is higher than the market rates. You could contact your lender and negotiate the possibility of getting a lower rate of interest. However, you have a better chance of getting the rates you want if you switch to another provider. The bottom line is that you need not accept the first offer you receive.

The Best Lender Before Won’t Be the Best Lender Today

When choosing a mortgage provider, make sure that the rates of interest and other terms like prepayment options are perfect for your current life and financial situation. Also, keep in mind that mortgage renewals are no doubt convenient but they also cost you high rates of interest that you can avoid with a little effort. You might have chosen the best lender 5 years ago but his terms may not be suitable for you at the present time.

Get a Rate Hold

Having negotiated the perfect deal with a new mortgage provider, you cannot complete the transaction right away. You’ll need to wait for the end of the mortgage term or you could incur the penalty for breaking your mortgage. Accordingly, you have the option of getting the provider to hold the agreed rate. Most lenders assure you that you can have the same rate at the time of renewal even if the rates have increased. However, you’ll have to request for the renewal within a period of 90 to 120 days. At the same time, in case the prevailing interest rates have dropped further, you can always negotiate for the best rate possible.

Shop Around Before You Renew Your Mortgage

When you reach the end of your mortgage term, if you still have a payable balance on it, you must renew the mortgage. You have two options. You can sign the renewal slip that your current mortgage provider sends you in the mail and renew the mortgage. Alternatively, you can search around the market for a new leader who has the terms, conditions, and interest rates that are better suited for your evolving financial requirements and objectives. Accordingly, it is advisable to do some amount of research at the time of renewal.

Start Shopping Early

When your mortgage is due for renewal, your mortgage provider will offer you the option of renewal in the 120 days before the end of the mortgage term. Should you take up this offer, you won’t incur the prepayment penalty that is applicable for breaking the mortgage term ahead of time. While you do have the option of accepting the renewal, a wiser option is to search the market for information about the more favourable terms and conditions available out there. As a result, you’ll be better equipped to negotiate for more economical interest rates and prepayment options, among others.

Consider Your Financial Goals

Typically, mortgage terms last for 5 years and in this time you might find that many changes have occurred in your life and financial conditions. Changing situations might need you to look for mortgage terms and conditions that are better suited for present times. Accordingly, you might want to assess your options before accepting the offer of renewal on the same terms as before. Here are the changes that most people see:
  • Promotion or raise in income levels
  • Loss of a source of income
  • Retirement
  • Additional member in the family
  • Need to pay for a child’s higher education
  • Possibility of a move in the next five years
  • Need to access some of the equity earned on the property

Outline Your Mortgage Needs

Aside from changing financial objectives, you might want to assess the terms and conditions according to the other requirements you have. Here are some possibilities:
  • You might have an increase in income because of which you want to raise the mortgage payments you make each month. Accordingly, you must evaluate the prepayment terms.
  • You might think that you’ll have the necessary finances in the near future to pay off the entire mortgage sum. Accordingly, you should make inquiries about the prepayment penalty you’ll incur in case of both fixed mortgage rate and variable rate mortgages.
  • You might expect to receive an inheritance or bonus that you would want to use to pay towards the mortgage. Accordingly, you must find out about the lump sum prepayment facilities your lender offers.
  • You might be considering the possibility of selling the mortgaged home and/or moving to a new location in the next mortgage period of 5 years. Accordingly, you must choose a mortgage that assumable or portable.
  • In case the value of the mortgaged property rises, you might want to borrow additional funds against it. Accordingly, you must consider your options for refinancing and the prepayment penalties you’ll incur. Alternatively, you could opt to move to a collateral mortgage.

Renew in the Last 30 Days

The law requires that your mortgage provider must send you a renewal offer a minimum of 21 days before the end of the mortgage term. However, your lender is likely to send you a renewal offer by mail 120 days to 30 days before the mortgage ends. He’ll also include the lowest possible posted rate that is valid for 30 days time. Accordingly, you need not to worry about any potential increases in the rate in this time. By this time, you’ll have conducted the necessary research to find out about the lowest mortgage rates available in the market. With this information in hand, you can request for the best offer your mortgage provider can offer you. Be aware, though, that most lenders may not agree to the new rates. For this reason, you may want to contact a mortgage broker and be prepared with better offers from new lenders.

Make a Decision

You have now gone through the necessary steps of making inquiries, assessing your family situation, gauging your future financial status, and considering the renewal offer from your current mortgage provider. You are now ready to make an informed decision about the most favourable mortgage rates available and the best provider. You have two options to choose from:
  1. You can opt to remain with your current mortgage provider. Accordingly, you can sign the renewal letter and return it by mail. Alternatively, you can discuss the issue with the provider and request for better terms.
  2. You can opt to switch to another mortgage provider for more economical interest rates. Accordingly, you’ll have to take care of the paperwork involved. You’ll submit an application with a new lender and provide the mandatory documents so he can assess you against his lending criteria. You might also pay various fees and charges for making the switch. Some lenders carry a part or all of the applicable fees while others may expect that you cover the charges with cash. For instance:
    1. Discharge Fee
    2. Legal fee
    3. Assignment fee
    4. Appraisal fee payable for the verification of the value of your home

Switching Providers Takes Time

In case you choose a new mortgage provider within the renewal period, you must begin with the procedures well ahead of the end of the mortgage date. Your new lender may take the time to assess the paperwork you provide and match you against their qualifying criteria. Do keep in mind that lenders typically have their own criteria for evaluating borrowers. You might want to give your new lender at least a couple of weeks to get the paperwork in order. In addition to your application letter, you’ll need to provide:
  • Proof of employment and an income source
  • Documents showing you own the property
  • Proof that the property is insured
  • Copy of the mortgage renewal letter received from the current lender
If the procedures aren’t completed by the mortgage end date, you may have to renew your mortgage with the current lender at whatever terms and conditions he provides.

5 things to consider before renewing your mortgage

Mortgage Renewal Tips & Advice

Considering that the current national average home price is just over $500,000, a substantial section of your monthly household budget might go towards paying off the mortgage. However, with some smart thinking, you can get more economical rates and favourable terms and conditions with the renewal process. Use these tips before you sign the renewal offer you receive in the mail.

Start Shopping Early

Should you choose to renew the current mortgage, you can complete the process in the 120 days before the mortgage term ends. You won’t incur a penalty for breaking the mortgage, but you may also not receive the best mortgage rate and product available in the market. Instead of signing and returning the renewal letter, you might want to do your homework and scout around for the best offers available. Check online or consult a mortgage broker before the mortgage end date.

You Can Ask for a Better Rate

Close to the end of your mortgage term like in the last 30 days, your lender is likely to send you a renewal letter by mail. The letter will likely include a discount of 0.75% off on the existing mortgage rate you’re already paying. A very convenient option is to simply sign the letter and send it back to maintain your mortgage. But, by accepting it, you could pay an interest rate that is higher than the market rates. You could contact your lender and negotiate the possibility of getting a lower rate of interest. However, you have a better chance of getting the rates you want if you switch to another provider. The bottom line is that you need not accept the first offer you receive.

The Best Lender Before Won’t Be the Best Lender Today

When choosing a mortgage provider, make sure that the rates of interest and other terms like prepayment options are perfect for your current life and financial situation. Also, keep in mind that mortgage renewals are no doubt convenient but they also cost you high rates of interest that you can avoid with a little effort. You might have chosen the best lender 5 years ago but his terms may not be suitable for you at the present time.

Get a Rate Hold

Having negotiated the perfect deal with a new mortgage provider, you cannot complete the transaction right away. You’ll need to wait for the end of the mortgage term or you could incur the penalty for breaking your mortgage. Accordingly, you have the option of getting the provider to hold the agreed rate. Most lenders assure you that you can have the same rate at the time of renewal even if the rates have increased. However, you’ll have to request the renewal within a period of 90 to 120 days. At the same time, in case the prevailing interest rates have dropped further, you can always negotiate for the best rate possible.

Switching Providers Takes Time

In case you choose a new mortgage provider within the renewal period, you must begin with the procedures well ahead of the end of the mortgage date. Your new lender may take the time to assess the paperwork you provide and match you against their qualifying criteria. Do keep in mind that lenders typically have their own criteria for evaluating borrowers. You might want to give your new lender at least a couple of weeks to get the paperwork in order. In addition to your application letter, you’ll need to provide:
  • Proof of employment and an income source
  • Documents showing you own the property
  • Proof that the property is insured
  • Copy of the mortgage renewal letter received from the current lender
If the procedures aren’t completed by the mortgage end date, you may have to renew your mortgage with the current lender at whatever terms and conditions he provides.

Most Providers Will Do the Switch for Free

When negotiating terms with a new mortgage provider, be sure to ask about the applicable fees. These may include the discharge fee from your current provider, the property appraisal fee, and any others. Many lenders offer to cover the fees in an attempt to make their offer more attractive. See if you can factor in this facility in your deal.
Your contribution: You will be expected to put down a higher down payment as compared to what is required for residential property. As a rule for a residential/commercial mix a down payment of 20% to 35% is expected. If your property is all commercial then you may be expected to come up with 50%. The lender will take into account your risk profile when determining the expected down payment. Insurance for your commercial property Canada CMHC will not insure a 100% commercial property but they will consider insuring mixed property with a low down payment such as 15%. There is more risk involved with commercial property as a business is more apt to go bankrupt if the business is failing. For this reasons the lenders want insurance security. Using the right resources Obtaining a commercial mortgage can be complex and difficult. Relying on the right resources such as a quality and experienced commercial mortgage broker will help you achieve your goals. There will be a mortgage broker fee that you will need to pay but this is usually quite reasonable and is usually a few thousand dollars. It is well worth it as they have the contacts and expertise to find the right commercial mortgage lender for you.

Most Providers Will Do the Switch for Free

When negotiating terms with a new mortgage provider, be sure to ask about the applicable fees. These may include the discharge fee from your current provider, the property appraisal fee, and any others. Many lenders offer to cover the fees in an attempt to make their offer more attractive. See if you can factor in this facility in your deal.

Shop before you Renew

At mortgage renewal time, it is important to keep in mind that all financial institutions are about making a profit. Unfortunately, according to the Canada Mortgage and Housing Corporation (CMHC), between 60-70% of Canadians ignore this at mortgage renewal time and sign the letter and mail it back without taking time to review their options. A bank isn’t going to automatically drop your interest rate from 6 to 5% just because your credit score has improved. This is why it is so important to shop around before you renew. If you want to make sure you are getting the best rate you can, it is a good idea to contact a mortgage broker. Brokers have access to the lowest rates, and once you have their quote, you can call the original financial institution and notify them that if they do not match the rate, you will leave. Typically, a lender will match the rate, and may even beat it. If your lender chooses not to match, then it is time to leave. Reduced interest is simply too important to ignore as the savings can add up to many thousands of dollars over the term of your loan and can also reduce your monthly payments. One of the best things about renewal is that it is free, meaning there are no penalties for renewal. In some cases; however, a renewal requires a new appraisal which can costs between $300-600. As long as you have a clean credit history, and have made all your mortgage payments on time, the financial institution granting the loan should take care of this. In addition, there is also a $100-200 discharge fee that confirms you have a new lender. You are not responsible for this. Note: If you have credit problems you may be responsible for mortgage renewal costs, if you are in doubt contact your lending institution to be sure.

Mortgage Renewal Information & Process

At mortgage renewal time, it is important to keep in mind that all financial institutions are about making a profit. Unfortunately, according to the Canada Mortgage and Housing Corporation (CMHC), between 60-70% of Canadians ignore this at mortgage renewal time and sign the letter and mail it back without taking time to review their options. A bank isn’t going to automatically drop your interest rate from 6 to 5% just because your credit score has improved. This is why it is so important to shop around before you renew. If you want to make sure you are getting the best rate you can, it is a good idea to contact a mortgage broker. Brokers have access to the lowest rates, and once you have their quote, you can call the original financial institution and notify them that if they do not match the rate, you will leave. Typically, a lender will match the rate, and may even beat it. If your lender chooses not to match, then it is time to leave. A reduced interest is simply too important to ignore as the savings can add up to many thousands of dollars over the term of your loan and can also reduce your monthly payments. One of the best things about renewal is that it is free, meaning there are no penalties for renewal. In some cases; however, a renewal requires a new appraisal which can cost between $300-600. As long as you have a clean credit history, and have made all your mortgage payments on time, the financial institution granting the loan should take care of this. In addition, there is also a $100-200 discharge fee that confirms you have a new lender. You are not responsible for this. Note: If you have credit problems you may be responsible for mortgage renewal costs, if you are in doubt contact your lending institution to be sure.
Vik Palan

Vik Palan

Chief Editor - Findbetter.ca

FindBetter.ca
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