The Learning Centre:
The top 10 tips for getting the most out of your mortgage renewal
(Reading time: 4:30)
Creating lesson plans, grading papers, and filling out report cards and evaluations. Your life as an educator involves a lot of paperwork. While most of that paperwork is done electronically these days, it can still be a lot to keep up with.
So when mortgage renewal time comes around, you may be tempted to simply sign that renewal letter and be done with it (because time is ticking and you’ve still got a stack of papers to grade).
However, don’t be so hasty to renew your mortgage without doing a bit of homework first.
According to an Angus-Reid survey, 27% of Canadian mortgage-holders allow their mortgages to automatically renew without a second thought. That lackadaisical approach to renewal can mean missed opportunities to save money and take advantage of new mortgage features and products that may actually be a better fit for your needs.
To avoid missed savings or opportunities, here are our top 10 tips to ensure you’re getting the most out of your mortgage renewal:
Tip #1: Do your rate research.
How do current mortgage rates compare to what you’re paying now? Are they lower? Are they creeping higher? Knowing what other financial institutions are offering in comparison to your current rate will give you an idea of how much wiggle room you’ll have to negotiate (because you will have room to negotiate—see tip #2).
Tip #2: The posted rate is never the ‘lowest’ rate.
A bank is just like any business—they’re in it to make money. So think of the posted rate as the number the bank wants to sell you on (in order to make the greatest amount of profit on the interest you pay). This number typically has plenty of room to be talked down. So don’t be afraid to negotiate.
Tip #3: The lowest rate may not be the best rate.
Cheaper doesn’t necessarily mean better when it comes to your mortgage. So it’s best to read the fine print before your sign—or better yet, ask the lender what penalties are associated with the lowest rate. For example, by accepting the lowest rate, are you sacrificing the ability to make extra payments? Also, what are the penalties for breaking your mortgage early? (In case that big windfall or gratuity payment comes in)
Tip #4: If you get a lower rate, keep your payments the same.
You’re probably thinking WHY go to all the trouble of negotiating a lower rate, only to make the same monthly payment. But we have a good reason for that. While lower monthly payments could increase your cash flow, it most likely wouldn’t be by much. However, keeping the same monthly payments at your renewed lower interest rate means reducing the overall amortization and paying your mortgage off sooner—giving you maximum ‘bang’ for your buck.
Want to pay your mortgage off 5 years faster? Here are 3 simple strategies to help you.
Tip #5: Put a little extra towards the principal.
Renewal time is the perfect time to make a lump sum payment on your mortgage because there are no pre-payment limits. This is your opportunity to make a serious dent in your amortization and save in total interest costs because every dollar goes to paying down the principal.
TIP: If you’ve recently moved up the pay grid or consolidated your debt and now have some extra cash flow to play with, consider putting that extra money aside for making a lump sum payment at mortgage renewal time.
Tip #6: Leverage equity to fund projects or goals.
While making an extra lump sum payment toward your principal can work in situations when you have money to spare, leveraging your home equity can be your solution to fund projects or needs when you don’t. Especially for big-ticket items such as home renovations, debt consolidation, or your children’s post-secondary education—so if any of those are on your list, renewal time is the time to refinance in order to take out equity.
Tip #7: Consider making the switch to a broker.
How’s this for irony: a Bank of Canada study found that using a broker could actually result in getting a lower mortgage rate than the big banks. This is because brokers have access to multiple lenders—therefore having access to multiple (and more) competitive quotes. If you’re still feeling a sense of loyalty to your bank, consider this: the same Bank of Canada study discovered that existing bank customers may not get as good of a deal than if they were to approach a different bank as a new customer. Translation: if you’re looking for the better deal, consider switching to another lender or broker.
Tip #8: Don’t be scared off from switching lenders.
Breaking up is hard to do—or at least that’s what some lenders may want you to believe. They may even tell you that you’ll have to pay a hefty discharge fee to switch your mortgage to another financial institution. But don’t be scared off from doing what’s right for you. Most lenders will simply absorb the discharge fee into the new mortgage. A minimal cost for landing a mortgage that offers you a far better rate or greater flexibility (or both).
Tip #9: Don’t leave your renewal to the last minute.
You (most likely) would never plan out a new school year the day before it starts. The same rule of thumb should apply to your mortgage renewal. Ideally you’ll want to start the process 120 days (4 months) before your renewal date. This will give you sufficient time to do your mortgage homework (as outlined in this article). Because the more prepared you are when it comes time to meet with your current lender, the better position you’ll be in to decide whether you should renew with them or take your mortgage business elsewhere.
Tip #10: Get educator-specific mortgage advice.
If your current lender is not Educators Financial Group, how well do they really know you?
At Educators Financial Group, we’ve been providing specialized mortgage products and advice to education members since 1975. That means we understand all of the unique elements that make up your professional world (such as compensation structures, pension plans, gratuities, and more).
Whether you’re shopping around for your first mortgage, coming up to renewal time, or thinking about purchasing a second property, we can provide you with the right mortgage based on your specific needs and budget.
Coming up to mortgage renewal time? Have one of our Agent-Regional Directors contact you with more information on our mortgage options designed with education members’ needs in mind.
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