The era of pleasant surprises for those renewing their mortgages appears to be over. In the aftermath of the 2008-09 financial crisis, interest rates declined, resulting in lower payments at renewal time for many Canadians. Fast forward 8 years. As interest rates rise, the first wave of post crisis renewals are seeing higher mortgage rates. If your mortgage is up for renewal this year, now is the time to be proactive and start comparison shopping.
The longest time that lenders will guarantee a discounted rate is between 4 and 6 months. If your current lender’s rates rise, it is wise to have a back up plan. Before negotiating a preferred rate from your financial institution, check out what the other lenders are offering. Various websites post the current rates from the major banks, which can vary widely. Never accept the bank’s posted rate but do take into consideration their mortgage features, advice and policies which also can vary between lenders.
If you do your homework, you can feel confident in asking your bank to match a competitor’s lower rate. Be prepared to switch to a lender offering a more competitive quote. There will be no penalty imposed if you make the switch at renewal time.
There are mortgage professionals who will do the rate research and negotiation for you, usually without a fee, as they are paid a commission from the lenders. According to the Bank of Canada, those who use a mortgage professional usually pay less than those who don’t. Saving even a half percentage point on your mortgage rate can save you up to $10,000 on a $150,000 mortgage amortized over 25 years.
And just to clarify … once the original term of your mortgage expires, you have the option of renewing it with the original lender or paying off the outstanding balance. Mortgage refinancing involves the process of paying out the existing mortgage for the purpose of establishing a new mortgage on the same property but under new terms and conditions.