How to get the best deal on your mortgage renewal? For many homeowners, mortgage renewal is a done deal. The lender sends you the papers, you see the new interest rate and you sign. According to Angus Reid, a full 27% of home owners never even look for a better deal, but they should. Renewal time is an ideal time to get better terms.
Start looking at what lenders have to offer long before your renewal date. Do your homework and make your knowledge work for you. If other lenders have lower rates than what your mortgage company does, ask them to match it. If they won’t, you can take your business elsewhere. Payouts are penalty-free on your renewal date. Rates vary widely between lenders. A good mortgage broker can help you find the best rate and pre-qualify you with a lender so that they guarantee your rate. Most lenders will allow you to lock in a good rate for between four and six months. If the rates rise, you’re safe; if they drop you just renegotiate.
Even if your bank’s rate seems reasonable, don’t accept the first thing they offer you. Lenders often have leeway and can adjust rates. You will never get a lower rate unless you ask for one. Lenders may be more willing to offer you a lower rate if you mention that you are willing to transfer over other accounts or investments, such as your RRSP, to their institution.
Renewing your mortgage is not just about getting the best interest rate. Surveys show that 36 percent of homeowners want to pay off their mortgage quicker. Mortgage holders want the freedom to pay down their debt through additional monthly payments, lump sum payments or larger monthly payments. When it comes time for your mortgage renewal, these are serious options to consider. Shopping around is a key aspect to get the best deal on your mortgage renewal.
Secure a Lower Rate
One of the simplest ways to pay down your mortgage faster is through your monthly mortgage payments. If you discover that the interest rate has dropped and your payments will be lower, consider keeping them at the same rate. While your first instinct might be to keep the money and invest it something else, the figures tell a different story.
Let’s say you have a mortgage that you took out five years ago for $300,000 and your payments are $1,745 per month. After five years of payments your balance on your mortgage is now $278,184. Since that time the interest rate has dropped significantly and your new payment will now be $387 less than your old payment. You may choose to keep this money and pay the new lower payments. After five years, the balance on your mortgage will be $239,087. This is a reduction of $39,097. Sounds good, right?
Now, if you decide to keep your payments at the same amount you have always paid, it’s quite a different story. You are now paying an extra $387 a month directly against the principal balance outstanding on your mortgage. After five years of payment, your balance will only be $213,914, a difference of $64,270. When you calculate that you are paying $387 for 60 payments, the extra payments only add up to $23,220. How could the mortgage be so much lower? The answer is interest. Securing a lower rate is extremely important to getting the best deal on your mortgage renewal and can save you thousands.
Each time you make this additional payment against the principal you lower the balance and pay less interest. Without making these additional payments, it normally takes almost 18 years to pay off the first half of your mortgage and eight years for the balance, all because of interest. Lastly, by making payments against the principle, you short-circuit the process and save a bundle. These are the methods in which you can get the best deal on your mortgage renewal.
Whether you want to pay down your mortgage quickly, or not, everyone wants to save money. Also, take the time to visit a trained mortgage professional and find the best possible deal you can for your renewal. How to get the best deal on your mortgage renewal? you can contact us here.