Mortgage Coming Up For Renewal?
There are basically three options when it comes to your renewal.
- Stay with your current lender
- Switch/transfer to another lender who has a better mortgage rate or product for you.
- Refinance to debt consolidate or take out some equity for renovations or investing etc…
Let’s start with the first option, most people simply sign the renewal letter that comes to them from their bank or mortgage lender. That’s not necessarily a bad thing in itself, however, a 2015 mortgage consumer survey found that more than half of homeowners renewed their mortgages without negotiating better rates or terms than those that were given to them on their renewal offers. Because of this banks or mortgage lenders may not be so inclined to offer the best rates to their existing client upfront since most simply take what’s been offered to them anyhow. Banks or mortgage lenders count on the fact that most people won’t want to be bothered with switching lenders and the process of providing documents and having to qualify for a mortgage at a different bank or mortgage lender. It’s much simpler and convenient to agree to the terms sign the documents and send it back to your bank or mortgage lender. And you could be leaving thousands of dollars on the table because you could find better rates and better terms from another bank or mortgage lender.
Now let’s discuss the second option, if you decide to shop around through a Mortgage Broker like myself, you will have to qualify much like you did when you bought a house. There is a process that goes along with this and there are plenty of banks or mortgage lenders that are eager to make it easy and convenient for you. There are documents to provide, however, there is often no appraisal needed so no cost there and no Lawyer needed either. So there is no cost there. There is a signing agent that will come to your house. There is a cost for this however it’s at the cost of the new lender so no cost to you once again. There may be a cost to switch to another bank or mortgage lender but that cost will be from your current bank or mortgage lender. This is usually in the form of a discharge fee or an admin fee for discharging the mortgage. The costs are usually so low to switch to another bank or mortgage lender that you will quickly make up for it with a lower cost of borrowing.
Now let’s discuss the third option if there is a lot of equity in your home you may choose to look into using that equity in a couple different ways. One reason is so you can roll some other higher interest debts into a much lower interest mortgage. This can be a good idea to lower the cost of borrowing over all of your debts. It’s easy to calculate a before and after refinance picture to see if you will be farther ahead by doing this.
The second reason for taking equity out of your house is for renovations on the house or for investing. Both situations can have a positive effect on your lifestyle and wealth over the long term if you make good choices with what to do with the money.
Back to the process of refinancing. This almost always requires an appraisal and a Lawyer to facilitate the refinance transaction. Often the cost of the appraisal can be covered and sometimes the cost of legal fees can be covered as well. You will still need to qualify for a mortgage and provide documents to someone like me your mortgage broker as part of the process.
If any of these options seem like it’s for you please contact me.
Any other questions, please contact me.