This article was originally posted August 8th, 2011 by Jennifer Cookson. Updated September, 2014
Mortgage Renewal Coming Up?
If you are fast approaching the end of you mortgage term, you should soon be receiving a letter of renewal from your lender. Renewal letters are quite convenient; you are usually offered a number of terms and rates and it’s your job to pick one, sign at the bottom and send it back to your bank – easy peasy. The catch, however, is that the rates offered in those handy letters are not typically competitive and their convenience can cost you big bucks in the long run. It’s always worth your while to do a little investigation before you sign away another five years.
To start, once you have your renewal letter in hand, have a look at mortgage rates online to see how the rates you are being offered stacks up. Most of the time you'll find that your lender isn't offering you the best deal available at renewal.
If you’re seeing any difference, contact a licensed mortgage broker to find out if you qualify for one of the better rates. If your credit and employment has remained fairly stable during the last term of your mortgage, you shouldn’t have any difficulty obtaining a new mortgage with a new lender.
Your mortgage broker will be able to compare the interest rates and show you just how much money you could save yourself and after your socks have been blown off and you retrieve them and put them back on, you will typically have three choices:
Option 1 - The "Sign It Because Money Doesn't Matter to You" Option
Sign your renewal letter anyway and choose from the paltry list of of rates your lender has offered up because it’s the easiest thing to do. See below to understand why that's a bad idea.
Option 2 - The "I Like Being Abused by My Lender" Option
Get your current bank on the phone and try to negotiate with them to get a better rate using your mortgage broker’s offering as leverage. This can sometimes be an effective strategy but why would you want to negotiate with an institution that has forced you into negotiating in the first place? Why wouldn’t your lender have offered you, a loyal, tried and true customer, their very best product to begin with? At this point, you have to ask yourself, does this lender really respect and appreciate my business and have they really earned it again for another term? (The answer is probably no)
Option 3 - The "I Don't Like Dirty Tricks and I'm Not Going to Take it Anymore" Option
Talk to your mortgage broker about the steps required to obtain a new mortgage with a new lender, at a better rate. Lenders are trying to make it easier every day to switch your mortgage – though it is more involved than just signing the renewal notice from your lender. It will involve a credit check, income verification, and your most recent mortgage statement. If the new lender requires an appraisal of your property, they’ll pick up the cost along with the fees associated with discharging your current mortgage at renewal and the associated legal costs - unless your institution is registering their mortgages as collateral charges. In most cases, you won’t even have to visit your lawyer’s office as the lender will send a legal representative to your home for your final signature.
Sure, it’s a little more work to gather a few documents together than it is to sign a piece of paper, but aren’t you worth it? We think you are, because we know that even a fraction of a percentage point can save you thousands of dollars in interest and put you that much closer to being debt free and who doesn’t want to be debt free?
Third Party Validation
This guy isn't even a mortgage broker, but he's practically begging people not to just sign blindly with their existing lender at renewal. Great story and worth following his advice:
Renewing your mortgage? Here's why you should pick up the phone