Renewing your mortgage?

The average homeowner spends a considerable amount of time shopping for the first mortgage but the same cannot be said for many us upon renewal. The numbers vary, but it has been reported that between 15% -30% of homeowners simply sign and return their renewal document at the posted rates offered by their Lender. Here are 10 great tips to help you in renewing your mortgage and save money over the life of your mortgage.

1. Plan ahead.

Give yourself ample time to research different lenders products and features. Start taking action on your renewal at least 120 days (4 mos.) in advance. This is very important if you find yourself in a rising rate environment but will also allow you plenty of time to make the smartest choice possible.

2. Review your risk tolerance

One of the biggest questions you should ask yourself is fixed rate vs. variable rate. There are many pros and cons to each but ultimately you need to assess how much risk are you willing to take on? A variable rate mortgage can fluctuate so your payments may increase without much notice. A fixed rate mortgage may have a higher rate that will not change over the term thus giving you stability in payments but at a price.

3. Review your amortization period.

A reduction to your amortization is another great way to reduce the interest you will pay over the life of your mortgage.  Consider a small reduction to your amortization, perhaps 1 or 2 years less than what is remaining under contract.  For example, if you originally took out a 35yr mortgage and you have just completed your first term of 5yrs. – most people will automatically renew at a 30 yr. amortization, consider 29 or even 28 years. If you can manage the payments with this new amortization it will add up to savings over the long run.

4. Review your payment frequency.

Now is a great time to review your mortgage payments. Any additional payments to your mortgage will save you thousands in interest over the life of your mortgage. Compare accelerated weekly or biweekly payments to the conventional monthly payments and notice the difference. If you can’t change your payment frequency consider the option of making a lump sum payment.

5. Compare mortgage rates.

Finding the best mortgage rate is a good starting point when conducting research for your renewal, but mortgage rates are not the only thing that matters. Your research should include various lenders products, interest rates and interest rate trends, prepayment options and penalties to name a few. Having a thorough understanding of what is available and what the competition is offering will not only allow you to make a smarter choice, but give you negotiating leverage.

6. Read the fine print.

Checking the fine print on your mortgage renewal will help you to avoid costly mistakes in the future. Make sure you review all of the details, including prepayment options, refinancing penalties, and early renewal policies etc.

7. Watch out for marketing gimmicks!

Switch your mortgage for free! 3% Cash Back for your mortgage! Banks and mortgage lenders will offer all sorts of incentives to attract mortgage customers. These incentives are often complicated and not easy to compare to competing offers. Are there any extra penalties or fees for breaking the term?  Does the mortgage have limitations as a result of the promotional offer? Extra caution and investigation is warranted when considering these types of promotions.

8. Don’t take on more debt.

Many economists are warning consumers to rein in their borrowing and increase their savings & pay down debt. Overall consumer debt has been fuelled by record low borrowing rates that are expected to climb. Many financial advisors and Brokers will offer to consolidate higher interest rate debt such as credit cards into your lower rate mortgage. While this may seem the right action to take it may not be and will warrant a thorough review of all options.

9. Purchase protection for your mortgage.

Purchasing either mortgage insurance or life insurance is a smart way to protect your family and assets. Find out more about the differences between mortgage insurance and life insurance and compare quotes to get the best rate.

10. Ask for a lower rate.

Asking for a lower rate may seem very obvious but many people simply sign and return their renewal documents at posted rates.  If you do nothing else, upon receiving your renewal notice place a call to your current lender and ask them if they can lower their rate.

LAST TIP

For personalized and unbiased advice, you should speak with a mortgage broker. A good mortgage broker will not only answer all of your questions but provide you with the knowledge to better manage your mortgage.