Twice over the last week, I’ve had conversations with clients regarding their mortgage renewal offers that have really concerned me.
If you are new to the mortgage world, when you first get a mortgage you choose a term of anywhere from six months to 10 years. Your interest rate (if fixed) is locked in for this period of time. At the end of whichever term you chose, your mortgage is up for renewal. You can choose to stay with your same lender or look for another lender.
As a rule, when I am working with my clients leading up to their renewal date, I research to see what is available for them in terms of options. If they are planning to renew their mortgage without making any changes the first place I check is their current lender.
Signing a renewal offer is pretty straightforward. You consider the options presented by your current lender, select your preferred choice, and sign on the dotted line.
If clients are planning on going this route, I offer guidance and support to try to get them the best rate possible with their current lender. Unless there is a dramatically better offer with another lender this is the path of least resistance for you.
For my own clients, I selected their original lender for a combination of reasons so it often makes sense for them to stay put.
If clients are wanting to pull equity from their home or add a credit line to their current mortgage then we look a little further afield.
The two conversations that concerned me this week were with clients planning to stay the course with their current lender. Both clients were with the same lender. Their renewal offers arrived with the rate of 6.14% for a five-year term. In one case, the clients had an insured mortgage, and in the other the client owed less than 50 per cent of the value of his home.
For perspective, most lenders are offering around 4.64% for insured mortgages right now. Several lenders, including the one both of these clients are with, are offering the same rate for clients who have more than 35 per cent equity in their homes.
After several back and forth requests with the lender, both of these clients signed their renewals at 4.64 per cent. For the larger of these two mortgages, the interest difference between the two rates amounted to a savings of $26,673 over the next five years. Better yet, the difference in the monthly payment was $328.94.
With costs soaring across the board, $328.94 a month goes a long ways towards covering other expenses.
What was particularly concerning for me was a comment from one of these clients.
“If you hadn’t reached out to help us with our renewal, we would have just signed off thinking that was the best rate they would offer us,” she said.
I cannot stress enough how important it is to connect with a mortgage professional to look into your mortgage renewal options. Have your mortgage balance at renewal available, as well as the value of your home. It is also important to know if your mortgage is insured (when you purchased you had less than 20 per cent down payment).
Having this information handy when you reach out to your mortgage professional will help them narrow down the best options for you.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.