When your mortgage term is nearly up, your lender will offer an easy renewal, but don’t be fooled into signing it
By James Harrison
If your mortgage is up for renewal anytime soon, you can expect to receive a letter from your lender giving you the option to simply sign it and send it back for an easy renewal of your mortgage.
It may look innocuous. But it’s not. Whatever you do, don’t sign it.
The rate your lender is offering in that letter is probably half a per cent — or more — higher than the going rate. Depending on the size of your mortgage, that could cost you tens of thousands of dollars in additional interests charges, not to mention paying off thousands less in principal.
Consider your options with a broker
Don’t just sign the renewal letter and send it back. Instead, spend time making an informed decision about the biggest investment of your life.
The first step in your decision-making process is to reach out to a reputable broker. At Mortgages.ca, we help our clients consider their options by asking a few basic questions:
- Who is your current lender?
- How much is outstanding on your mortgage?
- When is the renewal maturity date?
- What are your financial goals in the next one to five years?
During a 10 to 20 minute call, with a bit of questioning, my clients eventually bring up something they hadn’t considered as a significant factor in their mortgage planning. They’re surprised to learn I can help them achieve their financial goals by managing their mortgage.
Most people don’t spend time thinking about the big picture and don’t have a knowledgeable sounding board for the discussion. I consider that a very important part of my role as a licensed broker. I ask questions to learn about their problems, then come up with solutions that will help them meet — and sometimes exceed — their financial goals.
Doing the work is worth it
Sometimes people think changing lenders is time-consuming, so they don’t question the renewal letter. They simply accept the bank’s terms without question. But exploring other options is well worth it. Would you trade 45 minutes for a few thousand dollars?
Whatever your informed choice turns out to be with your renewal, the process doesn’t have to be complicated. We can communicate by phone and email. In-person meetings aren’t needed — though they’re always possible.
Make an informed decision
When your mortgage term is over, you have three options:
- negotiate with your lender for a better rate than the renewal letter offers
- transfer your mortgage to a new lender to get a better rate and/or different terms
- refinance to get equity out, or to reduce payments by changing the amortization period
Timing is important
I advise my clients to make sure their new mortgage is set up approximately three to six months prior to the renewal date.
It’s important to reach out as soon as you get a renewal letter. If you leave your research and decision-making to the last minute, your lender may automatically renew you into an undesirable mortgage — and possibly at a very high rate.
Is your mortgage coming up for renewal soon? Contact us about how I can help you make the right choice.