Prior to securing your first mortgage, you considered a number of different factors such as the rate, term, amortization period and other important features. So, before your mortgage reaches its maturity date (in five years or however long it has been set), it’s important to spend as much time negotiating for your next term.
Renewal time is the perfect opportunity to review the details of your mortgage and re-examine your personal financial situation to ensure they’re still in sync. Chances are, your income and expenses have changed since your last mortgage was put in place, so you’ll want to take these into consideration.
Since you don’t have to renew your mortgage with your current lender, this is also a good time to shop around, with the help of your mortgage agent, to see what other lenders are offering and perhaps save some money. Your mortgage agent has access to many different types of lenders and will do the legwork for you in order to find the best mortgage options suited to your needs, potentially saving you thousands of dollars over the course of your new term.
It’s important to note that when your mortgage agent weighs your options, your credit will not be impacted. If, however, you decide to shop around on your own, every lender inquiry will result in a credit check, which will negatively impact your chances of obtaining the best possible mortgage.
Your mortgage broker will also help you navigate the mortgage stress test, implemented by the federal government in 2018. Ultimately, the stress test has made it more difficult for first-time homebuyers to obtain a mortgage, and more cumbersome and expensive for those with mortgages up for renewal.
Don’t trust early renewal offers
If you decide to stay with your current lender at renewal, you’re not required to pass the stress test, but this shouldn’t deter you from shopping the competition for a better product and rate.
Your current lender will likely send you an early renewal offer to get you locked in with them for another term. Signing this offer is often not in your best interest! Be sure to have your mortgage agent review the offer with you so you can weigh all your options.
Renewal is also the best time to tap into your home equity to improve cash flow, pay down debt, send your kids to school, buy an investment property, etc, because you won’t be charged a penalty for breaking your mortgage.
Have questions about what’s best for you at renewal? Answers are just a call or email away!