The mortgage renewal process can be difficult to navigate, which is likely why more than 75% of mortgage holders opt to renew with their current lender without giving it a second thought.
However, even if you’re able to save half a percentage point on your mortgage rate, that could equal savings of up to $10,000 over 25 years – and that’s based on just a $150,000 mortgage.
So, when it comes time to renew, here’s a list of a few things you should keep in mind.
1. The bank’s posted rate is not the only available rate
Like the age old adage, “Ask and you shall receive,” you absolutely must ask for a better rate. Negotiating with your bank by offering to transfer your other accounts and investments to their bank may result in you securing a better deal. You can also ask another lender to match or beat the rate of your current lender.
2. This process is just as important as the first time you got a mortgage
Yes, you read that right. The mortgage renewal process is essentially starting from scratch. With another opportunity to research and find the right mortgage rate, comes another chance to save money.
3. Ads can be misleading
We’ve all seen them. The ad that promises the lowest rate or the ability to switch to their services for free. These are simply marketing ploys to entice you – promotions like this often come with strings attached, so err on the side of caution and do your research before accepting them.
4. There are other options available
Do your homework: Shopping around for the best available rate will save you big bucks. Give yourself four months of preparation to prevent yourself from making costly rash decisions.
5. Early mortgage renewals don’t necessarily save you money
Banks will try to convince you that paying the fees to renew your mortgage early will be worth it because you will be able to lock in a lower rate, but keep in mind that this isn’t always the case.
6. Protect your mortgage
Protecting your family’s financial future is likely your number one priority. Therefore, you should always purchase mortgage insurance and life insurance in case the unexpected happens.
7. Switching lenders may come with fees, but may also be rewarding
Don’t be scared off by fees associated with switching lenders. Calculate the savings over time and you’ll be delighted to find out that the fees will quickly seem insignificant.
8. Understand your risk tolerance
Reviewing your tolerance for riskier mortgages will help you choose which one is the best fit for you. A fixed rate mortgage will provide you payment stability, where a variable rate may fluctuate so your payments may increase without much notice. With a fixed rate mortgage, however, your payments will likely be much higher.
9. Don’t forget to read the fine print
Doing your due diligence could end up saving you a lot of money in the long run. Many lenders will hide important details in the fine print that concern refinancing penalties, renewal policies or other details that could end being costly in the future.
10. You will be offered the option to consolidate your debts, but it’s not necessarily the best idea
Debt consolidation on the surface may seem like a great option with the low interest rate many major lenders will offer. It’s also an attractive option to have all your debts in one place. However, it’s important to note that your home is a secured debt, while many lines of credit or car loans are unsecured debt. With unsecured debt, defaulting on a payment will result in monetary penalties, while if you default on a secured loan, you run the risk of losing your home.
As you can see, the mortgage renewal process deserves some serious consideration. It’s more important now than ever to do your research before signing on the dotted line.
Use the Zoocasa mortgage calculator to help estimate your monthly payments and to access the lowest rates available.