First of 2015! RENEWALS!

After taking some time off from blogging I wanted to kick off 2015 by discussing mortgage renewals. Why? Lately I have been receiving a lot of inquires with many renewals coming up and in order to demystify the process I wanted to share my insight.

First, never ever ever take the offer you are given from your lender right off the bat. Most likely they have priced the renewal offer much higher simply because they are aware that many clients do not want to take the time to shop around. YET, shopping around can literally save you thousands in unnecessary interest costs, so it is worth your while to do so. Your lender knows that inherently people are either too busy or nervous at renewal time and therefore are offering rates (today) that are .10 to .30 basis points higher (or more). Although signing a renewal is a very easy process (usually it’s just one single page), shopping around for one is also very easy and here’s why:

First - some lenders offer a no-income switch program. This is only reserved for the types of deals that have had no income change since the last approval, for good credit applicants, and for people who have a high-ratio mortgage (CMHC insured originally). This is the easiest type of renewal to complete as all that is required is just the renewal form, void cheque and photo ID. Simple & easy.

Second - some lenders offer switches for clients who are stuck in a collateral mortgage. Remember, a collateralized mortgage is one that essentially locks you into an agreement with the lender and even at renewal does not allow you to leave without paying a legal refinance cost (as you must de-register the collateral charge). Yikes. That said, some lenders offer a switch product that pays for this fee and offers you the best rate at renewal, and, gets you out of that type of restrictive charge.

Third - renewal time may also be the best time to refinance. With headlines screaming about our consumer debt being the biggest burden on Canadians’ minds, renewing your mortgage can also be the best time to refinance since there is no penalty at this time, and, lumping in high-interest credit with a low-interest mortgage frees up cash-flow, improves credit score, and allows you to regain your foothold on your debt management.

Some points to consider when renewing:

Before you renew your mortgage it’s important that you assess your financial picture and your future goals. Example: why renew into a 5-year fixed term if you plan on selling in 1 year? Are you single? Engaged? Married? Potentially separating? Do you have kids? Is your house big enough? Are you saving enough? Are you house poor? These are just a few of the important questions one must ask themselves when going through a renewal process.

I hope this has given you at least some things to consider when doing a renewal. For any more questions please shoot me an email anytime and best of luck in 2015!

Posted in: News