If your mortgage is up for renewal, you bank or lender is required to give you at least 21 days’ notice. Normally at that time, they will also include an offer for renewal. But since most Canadians just blindly accept the first renewal offer, chances are that the lender is not giving you the best rate that they are authorized to give.
Taking the time to negotiate a better rate on your mortgage renewal may seem like a hassle, but it is a hassle that is well worth it. It can save you thousands of dollars.
The following are a few of our top tips on how to negotiate a better rate on your mortgage renewal.
- Do your homework. Find out what other lenders are offering.
- Talk to your mortgage broker. Mortgage brokers have access to dozens of lenders and some of the best rates available. Your broker even has access to lenders that you can’t access without a broker.
- Contact your current lender and ask for a better rate. When you are negotiating with your bank or lender, if you have been a long-time customer, remind them of that fact. You can also ask them if they have any deals or promotions for new customers which could be applied to you.
- Think about your current financial situation. Has it changed and enabled you to make higher monthly or bi-weekly payments? This might allow you to pay off your mortgage sooner.
- Mortgage renewal time is also a good time to think about the type of mortgage you have. Is this a good time to switch from a fixed-rate mortgage to a variable-rate mortgage or vice versa? Your mortgage broker can go through the pros and cons of each type and help you decide what is best for you at the current time.
When should you start thinking about your mortgage renewal?
It is best to start thinking about your mortgage renewal several months before your renewal date. This will give you time to consult with your mortgage broker and explore your various options before you are pressured to do so.
Tips for Renewing Your Mortgage
It used to be that Canadians looked forward to mortgage renewal time because it meant that they could negotiate a lower rate with their financial institution. But considering that the Bank of Canada has raised interest rates five times over the last year and is likely to do so again in the near future, this is no longer the case. Furthermore, the new financial stress test makes it more difficult for mortgage holders to shop around. If they cannot pass the financial stress test, they won’t be able to move to another federally regulated lender and this limits their ability to negotiate with their current lender.
So, what should Canadians do when (and before!) they receive their mortgage renewal notice from their bank? Here area few tips:
- Talk to a mortgage broker. Before you sign a renewal offer from your current lender, be sure to sit down with your mortgage broker. They will have a good sense of whether you are being given a good offer or whether you should try for something better.
- Choose a lender you feel comfortable with. As mentioned, if you cannot pass the financial stress test, you will have less options when choosing a lender. Be sure to choose one that you can feel comfortable with long term.
- Take care of your credit. The better your credit is, the more options you will have at mortgage renewal time. Keep your debt under control and be sure to make your payments on time. This will help to make sure you have a good credit score and increase the likelihood that you can pass the financial stress test.
- Don’t take out a loan. If you are considering buying a new vehicle or need a loan for any other reason, try and wait until after you have renewed your mortgage. Taking out a loan prior to your mortgage renewal impacts your debt service ratio and could make the difference between passing or failing the stress test.
- Pay off loans if you can. If you already have a loan but are close to paying it off, it will be worth the hustle to get it paid a month or two before your mortgage renewal. The less debt that you have, the less risky an investment you will be for a potential lender and the better rate you are likely to get.
If your mortgage will soon be up for renewal, why not sit down with one of our professional mortgage brokers and let them help you get the best rate and terms. Call us today for an appointment.
What to do when your mortgage renewal is denied
It is unusual for lenders to deny mortgage renewals however there are circumstances where it can and does happen. This scenario can be quite frightening for a homeowner because it leaves them with uncertainty about whether or not they will be forced to sell their home. If your mortgage renewal has recently been denied, don’t panic. There are options.
Why might a mortgage renewal be denied?
The most common reason why a lender might deny a mortgage renewal is that the homeowner has experienced a large drop in their credit rating. If your mortgage renewal has been denied, your first course of action should be to contact your mortgage broker. The earlier you contact your broker, the better your options will be.
What steps should your take when your mortgage renewal has been denied?
Once you contact your mortgage broker, they will take you through a series of steps. While it is possible to try and navigate this chain on your own, you are likely to get better rates and terms if you work with a professional mortgage broker that already has established relationships with lender.
A Lenders and B Lenders – The best mortgage rates and terms will be available from A Lenders (banks, credit unions, etc.) but A lenders will only work with borrowers that they consider low risk. So if your credit has been damaged, your mortgage broker will review what options you have with B lenders. (B lenders are institutions that specialize in helping people with damaged credit).
Private Lenders – An alternative to working with B Lenders is working with a private lender. This is an individual – possibly a friend or family member – or company that invests in mortgages. Mortgages with private lenders typically have higher interest rates but they are also usually for shorter terms so this could be an option for you while you are repairing your credit.
Selling Your Home – If you are unable to renew your mortgage even with a private lender – or if you decide that you do not wish to go this route, the final option is to consider selling your home.
Having your mortgage renewal denied rarely means that you will have to sell your home however in some very extreme cases it may be your best option. Before you get to this point however, you should contact Akal Mortgages. One of our mortgage experts will be happy to help you!