Thanks to stricter lending rules, it’s getting more and more difficult to even qualify for a mortgage. Once you do, you’re not out of the woods yet. When you secure a mortgage it comes with a term and amortization period. The amortization period is the length of time it takes to pay off the mortgage. The most popular amortization period in Canada is 25 years. There’s also the mortgage term. That’s the length of time you that you locked into a mortgage rate, as well as other terms with a specific lender. A typical mortgage term in Canada is five years.
When the mortgage term ends you need to sign up for another term. It’s a common misunderstanding that you need to sign a new mortgage term with the same lender. This is not true. You can either sign on for a new term with your current lender or you can shop around, hoping to get a get a better rate and terms with another lender.
While some homeowners may wish they could just stick with the same mortgage terms for the entire amortization period, renewing a mortgage term every one, three, five, or 10 years, means you can find the best mortgage terms and rates that suit your ever-changing lifestyle and financial needs—and the changing dynamics in Canada’s dynamic housing market!
Below are four things you should consider before renewing your mortgage.
1. Renewal Statement
If you currently have a mortgage with one of the big banks or any other federally regulated financial institution, the lender will send you a renewal statement at least 21 days before the end of the existing mortgage term.
There is a chance your current lender decides it doesn’t want to renew your mortgage. If this is the case, they need to notify you at least 21 days before the end of the mortgage term.
No matter which camp you’re in, that doesn’t give you a lot of time to act. That’s why it’s important to get a head start looking around for a better mortgage term. The better informed you are the greater your chances are of renewing the mortgage with better rates and terms.
The renewal statement will contain the same kind of information that you would find on your current mortgage. This includes the balance remaining or the principle at the renewal date, the interest rate, terms, the payment frequency, and any fees or charges.
Most lenders will also include a mortgage renewal contract with the renewal statement, in the hopes you will just sign on for the same rates and terms.
Don’t do it.
Simply signing on the dotted line and returning the new mortgage term might sound easy, but it can only be costly. Chances are excellent you could get a lower rate and better terms with a new lender. After all, they want your business.
2. Your Mortgage Needs
If your mortgage term is coming to an end in the coming months, it’s the perfect time to review your mortgage needs and make sure your current lender is meeting your needs. Life is not static, there is a good chance your needs have changed.
How can you tell if you need to find a new lender? Ask yourself:
- Has my financial situation changed? Can I increase my payments to help pay off my mortgage sooner?
- Can I change the payment frequency, switching from monthly to bi-weekly, or even weekly? Doing so means paying off the mortgage faster and paying less in interest.
- Are you happy with the kind of service your current lender provides?
- Have you accumulated too much high-interest debt (credit card, car loan) and want to consolidate with a larger mortgage?
3. Shop for Better Interest Rates
The biggest reason why people shop around for a new lender when their mortgage comes up for renewal is to find better interest rates. After all, lower interest rates mean more money in your pocket every month and less going to the banks.
Don’t wait until you get the renewal letter in the mail. Shop around, find a lender that will offer you the kind of rates, terms, and conditions that better suit your lifestyle needs.
Best of all, you don’t need to stick with traditional lenders. Private lenders are independent, meaning they do not need to adhere to the same strict rules federally regulated banks and trust companies do. They provide the same kind of services that traditional lenders do, but they also offer you better options, which provides you with more freedom to choose what’s best for you.
4. Switch to New Mortgage Lender
If your current lender will not give you a better, discounted interest rate, lower than the one quoted in your renewal term letter, think of switching to a new mortgage lender. Just be sure to weigh out your options.
Traditional lenders, like Canada’s big banks, will only try and sell you their own financial products, even if it’s not in your best interest. Private lenders, because they are independent, have access to hundreds of different lenders and are looking out for your best interest.
When negotiating with a new lender, tell them what your current lender offers and about offers you’ve received from other financial institutions or mortgage brokers.
Finding the lowest interest rate is important, but there are other factors to consider too. If your financial position has changed, you may want different terms than what was originally agreed to or your current lender is offering.
The lender works for you. Make sure you get what you need.
Canadalend.com, Helping You Refinance a Mortgage
If your mortgage is coming up for renewal and you want to see if you can find a lender with better rates, terms, and conditions, contact a licensed mortgage professional at Canadalend.com.
Because the mortgage experts at Canadalend.com are independent, they have access to hundreds of different lenders. Many specialize in providing mortgages for those who are self-employed, have unreliable income, are new to Canada, or have no credit.