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Planning Ahead to Get the Best Terms on Renewal!
Joe Tomkins • March 31, 2021
If your mortgage term is almost up for renewal, there’s a good chance you’ll be pleasantly surprised with the low-interest rates available on the market today. While the pandemic has caused a lot of economic uncertainty, the result has been very low interest rates. In fact, the Government of Canada has indicated that rates will most likely stay low until 2023.
So if your mortgage is up for renewal in the next 6 months, here’s what you should do.
Start now. Yep, right now.
Getting ahead of your renewal is one of the most important things you can do. This will ensure that you don’t get busy, forget about the deadline, and have to make a rush decision. Or worse yet, your mortgage won't renew into a product you didn’t choose for yourself. You’ll want to weigh your options and make the best choice for you. This can take time. So start now.
One of the benefits of reviewing your renewal with an independent mortgage professional is saving hours of research. We deal with mortgage financing daily; our job is to keep up with all the lenders and their products and provide you with professional advice.
Please connect with me to discuss your renewal. I’d be more than happy to outline all your options.
Don’t sign your lender’s renewal offer.
If you’ve already received a renewal letter from your current lender, the last thing you want to do is just select the term with the lowest rate, sign it, and send it back. You have more options than this.
Renewal documents will showcase rates and products that are good for the lender, not necessarily for you. Mortgage lenders are in the business of making money, and as close to half of people sign their initial renewal offer without negotiating a better rate, lenders don’t feel they have to put their best offer forward. In fact, they make more money by doing the exact opposite.
Just because your current lender was the best choice when you got your last mortgage doesn't mean they're still the best choice now. Make sure to consider all your options, not just the options in front of you. Let’s talk.
Don’t get stuck on the rate.
Modern consumerism has us conditioned to believe that the lowest price is always the best. And although this might be the case when buying stuff at the thrift store, it certainly isn’t when considering mortgage financing. Interest rate is only one thing you should consider when renewing your mortgage.
Your goal should be to assess the quality of your next term by how much it lowers your overall cost of borrowing. Life is full of changes; you’ll want to ensure the features of your mortgage, such as term length, mortgage type, penalties, portability, and prepayment privileges, all line up with your goals. The lowest rate mortgage doesn’t always come with the most flexible terms. And sometimes, it makes sense to take a higher rate for better terms. Professional advice will help a lot as you make your decision.
So there you have it. If your mortgage is up for renewal anytime in the next six months, please contact me directly. Let's work together to secure the best mortgage for you.
When arranging mortgage financing, your mortgage lender will register your mortgage in one of two ways. Either with a standard charge mortgage or a collateral charge mortgage. Let’s look at the differences between the two. Standard charge mortgage This is your good old-fashioned mortgage. A standard charge mortgage is the mortgage you most likely think about when you consider mortgage financing. Here, the amount you borrow from the lender is the amount that is registered against the title to protect the lender if you default on your mortgage. When your mortgage term is up, you can either renew your existing mortgage or, if it makes more financial sense, you can switch your mortgage to another lender. As long as you aren’t changing any of the fine print, the new lender will usually cover the cost of the switch. A standard charge mortgage has set terms and is non-advanceable. This means that if you need to borrow more money, you'll need to reapply and requalify for a new mortgage. So there will be costs associated with breaking your existing mortgage and costs to register a new one. Collateral charge mortgage A collateral charge mortgage is a mortgage that can have multiple parts, usually with a re-advanceable component. It can include many different financing options like a personal loan or line of credit. Your mortgage is registered against the title in a way that should you need to borrow more money down the line; you can do so fairly easily. A home equity line of credit is a good example of a collateral charge mortgage. Unlike a standard charge mortgage, here, your lender will register a higher amount than what you actually borrow. This could be for the property's full value, or some lenders will go up to 125% of your property's value. In the future, if the value of your property appreciates, with a collateral charge mortgage, you don't have to rewrite your existing mortgage to borrow more money (assuming you qualify). This will save you from any costs associated with breaking your existing mortgage and registering a new one. However, if you’re looking to switch your mortgage to another lender at the end of your term, you might be forced to discharge your mortgage and incur legal fees. Also, by registering your mortgage with a collateral charge, you potentially limit your ability to secure a second mortgage. So what’s a better option for you? Well, there are benefits and drawbacks to both. Finding the best option for you really depends on your financial situation and what you believe gives you the most flexibility. This is probably a question better handled in a conversation rather than in an article. With that said, undoubtedly, the best option is to work with an independent mortgage professional. It’s our job to understand the intricacies of mortgage financing, listen to and assess your needs, and recommend the best mortgage to meet your needs. As we work with many lenders, we can provide you with options. Don’t get stuck dealing with a single institution that may only offer you a collateral charge mortgage when what you need is a standard charge mortgage. So if you’d like to have a conversation about mortgage financing, please get in touch. It would be a pleasure to work with you and answer any questions you might have.
You’d think an online calculator is a pretty straightforward device, one that you should be able to place your confidence in, and for the most part, they are. Calculators calculate numbers. The numbers are reliable, but how you interpret those numbers, not so much, especially if the goal is mortgage qualification. If you rely on the numbers from a “What can I afford” or “Mortgage Qualification” calculator without talking to an independent mortgage professional, you’re going to be misinformed. Don’t be fooled. Even though an online mortgage calculator can help you calculate mortgage payments or help you assess how additional payments would impact your amortization, they’ll never be able to give you an exact picture of what you can afford and how a lender will consider your mortgage application. While mortgage calculators are objective, mortgage lending isn’t. It’s 100% subjective. Lenders consider your financial situation, employment, credit history, assets, liabilities, the property you are looking to purchase. Then, they will compare that with whatever internal risk profile they are currently using to assess mortgage lending. Simply put, they don’t just look at the numbers. An online calculator is a great tool to help you run different financial scenarios and help assess your comfort level with different payment schedules and mortgage amounts. However, if you rely on an online calculator for mortgage qualification purposes, you’ll be disappointed. The first step in the mortgage qualification process is a preapproval. A preapproval will examine all the variables on your application, assess your financial situation, and provide you with a framework to buy a property based on your unique circumstance. Securing a preapproval comes at no cost to you and without any obligation to buy. It’ll simply allow you the freedom to move ahead with confidence, knowing exactly where you stand. Something a calculator is unable to do. Please connect anytime if you’d like to talk more about your financial situation and get a preapproval started. It would be a pleasure to work with you.
Although it’s ideal to have your mortgage paid off by the time you retire, that isn’t always possible in today’s economy. The cost of living is considerably higher than it has ever been, and as a result, many Canadians are putting off retirement, hoping to make just a bit more money to add to that nest egg. So if you find yourself in the position where you’re considering your mortgage options into retirement, you’ve come to the right place. The advantage of working with an independent mortgage professional instead of a single bank is choice. When you work with an independent mortgage professional, you won’t be limited to an individual institution’s products; rather, you will have access to considerably more options. Here are some options available to older Canadians as they plan for mortgage financing through their retirement. Standard Mortgage Financing If you’ve got a steady income, decent credit, and equity in your home, there is no reason you shouldn’t qualify for standard mortgage financing, which usually comes at the lowest interest rates and best terms. Some lenders use pension and retirement income to support your mortgage application even if you’ve already retired. Reverse Mortgage Financing A reverse mortgage allows Canadian homeowners 55 years and older to borrow money from their homes with no proof of income, no credit check, and no health questions. A reverse mortgage is a fabulous mortgage solution that has helped thousands of older Canadians enhance their lifestyle. Home Equity Line of Credit (HELOC) A line of credit secured to the equity you have in your home is an excellent tool to allow you to access money when you need it but not pay interest if you don’t need it. Many older Canadians like the idea of rolling all their expenses and income into one account. Private Financing If you happen to be in a bit of a tight spot, you have a plan but need a financial solution; private financing might be the answer. Indeed not the first choice for many because of the higher interest rates. However, private financing can provide you with options where a traditional bank can’t. If you have any questions about securing mortgage financing for your retirement, please connect anytime. It would be a pleasure to work with you and walk you through all your options.
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