Receive Your Renewal Letter? Its Time to Shop Around
February 14, 2017 | Posted by: Alison MacKenzie
When your mortgage comes up for renewal, your lender will send you a letter suggesting you renew at their current offer. This offer is typically not their best offer and they are hoping that you don't take the time to shop it around. Manulife Bank of Cananda, in their latest consumer debt survey, found that 65% of homeowners simply sign and return this letter, costing themselves hundreds of dollars a month by paying a higher interest rate than they need to. Renewal time is your opportunity to chat with a professional and make sure that you are getting the best mortgage rate and terms that you are entitled to.
When you are about to renew, it is important to consider how your mortgage needs may have changed. This may be a good time to roll your high-interest credit cards and other debt into your mortgage to get one lower payment, boost your cash flow and save on interest costs. Or you may want to take some equity out for renovations, a second property or for investing. You mortgage could be your best choice for lowest-cost funds.
Renewal is also a good time to decide whether you should consider a fixed or variable rate mortgage, increase or decrease your payments, or take advantage of prepayment privileges to pay your mortgage off faster.
When you switch your mortgage to a new lender, you will go through an approval process similar to when you took out the original mortgage. You can either assign your existing mortgage to a new lender (switch) or you can apply for a new one should you want to borrow a larger amount (refinance).
Your lender may charge a discharge fee, and you may need to pay legal and appraisal fees if you are getting a completely new mortgage. You won’t have to pay for your mortgage broker’s service (oac) because the lender selected pays compensation for the services and mortgage solution provided to you.
Its best to bring your Mortgage Agent your renewal letter as soon as you get it (usually 6 months before renewal). Many lenders that we deal with provide a 120-day rate guarantee for pre-approved clients to protect against a rise in mortgage rates.
There are some great options out there; be sure to look around!