Is your mortgage renewal date coming up?
How Our Mortgage Brokers Can Help
At AKAL Mortgages, we believe that you should not just renew your mortgage loan—you should renegotiate it! Our mortgage brokers have connections to numerous lenders and can help you assess your options and determine which one will provide you with the best loan terms. We can help you compare factors such as:
- Interest rates
- Lender fees
- Annual percentage rates (APRs)
- Monthly payments
4 things that you should evaluate to renew your mortgage
Begin to Shop 4 Months before Your Term is up
Mark your current mortgage term’s maturity date on the calendar, then count back 120 days (~ 4 months) and mark that too; this is the date majority of the lenders will let you begin the early mortgage renewal process, meaning you could renew early with your current lender without having to pay a prepayment penalty (for breaking your term early). If you’re not ready to sit down with your mortgage broker or lender on this day, you can at least start researching your options online. By identifying which lenders are offering what, in terms of mortgage rates, prepayment options and other terms and conditions, you will be better armed to mediate when you are all set to renew.
Consider Your Financial Goals
Let’s Face It: A lot can happen throughout your current mortgage term. Your financial goals at the beginning of your current mortgage term may no longer match up with your present goals. You could have received a substantial raise at work, lost some income or even retired. You may have had a baby, or need to pay for your child’s university tuition. If there’s any chance you’ll need to move in the next 5 years that should be factored into your decision. Or if you think you want to access some equity, you should be mindful of that too. Whatsoever your needs are, make sure you consider them when choosing a mortgage rate, term and product.
Be Ready to Renew in the Last 30 Days
By law, your current lender has to send you a mortgage renewal statement at least 21 days before your term is up, but they will usually mail you a renewal offer for their lowest posted rate that is good for the 30 days before maturity. By extending that offer for 30 days, you’re protected from any potential rate increases during that time. However, you should have done enough research by now to know whether or not it’s actually the best mortgage rate on the market – and if not, you’re perfectly within your right to try to negotiate. However, even if you sit down with your current lender to negotiate their offer, it’s unlikely they’ll be able to give you the best mortgage rate. Therefore, in your last 30 days, you should also make an appointment with a mortgage broker, to discuss what other lenders can offer you.
Make a Decision
After shopping around, considering your financial goals, outlining your mortgage needs and receiving a mortgage renewal offer from your current lender, it’s finally time to make a decision. The last question you’ll need to ask yourself is who is offering you the best mortgage rate and product: your current lender or another lender? If you decide to stay with your current lender, you can either choose to sign and return the mortgage renewal offer they sent in the mail, or sit down and try to negotiate a better offer in their offices.
Switching providers will require a little more paperwork, but you’ll find that doing so will give you access to better mortgage rates. Just be prepared to submit a mortgage application, as the new lender’s qualifying criteria might be different from that of your current lenders.
Along with your other financial goals, you should make a list of what you’re looking for in a mortgage product. To start, ask yourself a few questions:
- Does your monthly budget have room for you to increase your mortgage payment amount? (If so, review the monthly prepayment options in the terms and conditions.)
- Do you think you will receive any bonuses or inheritances that you could put towards your mortgage? (If so, you’ll also want to look at the lump sum prepayment options.)
- Do you think you will have the option to pay off your mortgage entirely, in this next term? (If that being the case, consider the prepayment penalties that go with fixed vs. variable rate mortgages.)
- Do you think you will want to borrow more money from your lender during this next term? (If that is the case, you will again want to consider the prepayment penalties involved in a refinance, or look at collateral mortgages instead.)
- Is there any chance you will be selling your home and/or moving in the next 5 years? (In that case you may need a mortgage that is portable or assumable.)
- Can I negotiate during renewal?
"You may as well hand your wallet over to the granter," says a buyer. If you identify that your current lender has the best mortgage features, advice and policies, ask your bank to match a competitor's lower rate.
"If you don't come right out and ask for a better rate, you won't get one," says a real estate lawyer in Toronto. He also claims that banks might be more desirous of lowering your rates if you transfer over other accounts or investments, such as an RRSP. Don't just fixate on the interest rate. The amortization period, the rate type (fixed or variable) and the flexibility of the payment schedule can be crucial to lowering your costs.