5 Reasons To Explore Mortgage Renewal Options
Why is your mortgage renewal so important? Look at it this way. Your renewal gives you the opportunity to hit the big RESET button on your mortgage. “51% of Canadians don’t plan on changing lenders when their mortgage is up for renewal, and 9% didn’t even know you could switch lenders to get a better rate” (Shaistha Khan at Rates.ca) The market is constantly changing and has no doubt changed since your mortgage funded, but possibly so has your financial situation. Most people don’t see their mortgage renewal as the beneficial financial opportunity that it is. Here are five reasons why you should explore mortgage renewal options.
1) Better Interest Rates
This is the biggest benefit in taking your mortgage renewal seriously. This is a great opportunity to get your a lower interest rate, possibly with a different lender. If within your last mortgage term, your financial situation has improved by paying off debts, getting a raise, improved credit score - all these factors can help you qualify for a better rate with lenders. Although the difference in interest rates seem minimal (a quarter of a percentage), you’d be surprised how significant even a small decrease in an interest rate could save you thousands of dollars. Take a look at this lender comparison chart below:
This chart illustrates how significant changes in interest rates can make in the long term. If we compare Lender 1 (5.74%) and Lender 4 (4.54%) the difference in payments is $343.68 MONTHLY which averages out to $20,620.80 over the 5 Year term. That’s a lot of money that you could be saving or investing elsewhere. Every percentage counts!
2) Save Money On Fees
Mortgage products differ in more than just interest rates, they also vary in terms of fees and penalties. By shopping around with different lenders at the time of your renewal, we may be able to find you a mortgage product with lower fees or more favourable penalties. These penalties apply to if you need to break your mortgage early or change your mortgage terms. It’s also good to know that most lenders with cover the cost for you to transfer your mortgage to their institution.
3) Improve Your Financial Situation
As mentioned, mortgage renewals are basically like a reset button. They give you the opportunity to modify your mortgage strategy to better fit your current financial situation. Whether that means opting for a shorter mortgage terms, switched from a fixed rate to a variable rate, or updating your payment frequency. Another option for those struggling with cash flow is to extend your amortization. Most people don’t see their mortgage as the financial tool that it is. A well-thought out mortgage strategy can be invaluable in helping you build your savings and budget properly.
4) Access Equity in Your Home
If you’ve acquired enough equity in your home throughout your last mortgage term, you may have the option to refinance your mortgage to access some money. This money can be used towards debt consolidation, home renovations or to invest in other assets such as a rental property. This is a great way to leverage your home’s value and improve your overall financial situation.
5) Don’t be fooled by low interest rates
Low interest rates don’t necessarily mean the best deal. There are many of conditions and aspects of mortgages that can benefit or disadvantage you, Here are some things to consider when researching, lenders, mortgage terms and interest rates.
Not all mortgages are the same, even if they have similar rates
Watch out for “Restricted Mortgage Products” that may have hidden terms and conditions
Read the fine print to ensure you’re not committing to a bonafide sales clause (this would require you to sell your home in order to break the contract/term)
Look for flexible mortgage options with reasonable prepayment privileges and penalty calculations, you never know if you may like to use it.
Don’t be lured by rates that seem too good to be true — they probably are.
Shopping around for the best mortgage rates can be a lot more complex than you think. The best way to make sure you are getting the best rate and the best mortgage product for your financial situation is to consult your mortgage professional. Here at Weninger Mortgages, we have access to a variety of lenders with various mortgage products and are dedicated to finding the best one for you. Book a call with us today so we can help you take control of your financial future.
