Will you be in the 70% who will leave money on the table?
30% of Canadians think about an informed and planned mortgage renewal. A fact is 70% of Canadians sign their renewal letters without any significant investigation of what other options may exist in the market.
Typically, lenders send out renewal letters four to five months before your actual renewal date. Many renewal letters are sent out by lenders are at the lender’s posted interest rates, which can be 2% above market rates, potentially costing the borrower an additional $2000 per year per $100,000 of mortgage in additional interest costs.
In the case with many banks, you may receive an early renewal option several months before your actual renewal date. All you have to do is simply, accept the offer on the letter and the bank will renew your mortgage early without penalties or extra fees. Renew now or loose the offer. – Is this to your benefit? I think not. The banks know there are better deals out there to be had by you. They are just taking you out of the market place before you have the option of shopping around and taking advantage of them
Now don’t get me wrong, banks are one of our top lenders for clients however, the perception the banks present as being on the customer’s side is misrepresented. The bank works for the bank. Everything the bank does is in the bank’s best interest and the interests of their share holders, NOT YOU the customer. In fact, the bank customer is further mislead by the bank’s misuse of the term “Client”. I’m sorry but I come from a 30 year plus career as a real estate broker. An industry where the term “Client” is not interchangeable with the term “Customer”. RECO clearly defines the terms “Client” and “customer” as follows:
“ if you are a client, the brokerage has an important obligation to you, called fiduciary duty, and must promote and protect your best interests in the real estate transaction. If you are a customer, the brokerage does not have that obligation, but is obligated to treat you with fairness, honesty and integrity, and to provide you with conscientious and competent service.”
If this distinction between client and customer were observed by the banks, they would be obligated to offer you their best rates and terms as a “Client” which is simply not the case.
Now back to your mortgage renewal. – Remember, you’re now in the drivers seat. You’ve now got a track record as an owner. Lenders will want your business and compete for it. That’s where a mortgage broker, an agent for YOU, the client can help you potentially save you thousands of dollars over the term of you mortgage at renewal time.
Switching your mortgage from one lender to another does not require any other significant changes to your banking. In fact, there are strategic benefits to having your mortgage with one institution while maintaining a personal banking relationship in a separate institution.
Don’t let the hassle from the first time you negotiated your mortgage when you purchased your home dissuade you. Switching your mortgage to another institution is a clean and simple experience.
At your mortgage renewal you have far greater power than you might believe. In many cases it costs you nothing to change institutions as many lenders will pick up the costs appraisal, legal and administration fees in exchange for you moving your mortgage to them.
So be proactive with your mortgage planning. Don’t wait until a week or two before your renewal. Contact a mortgage broker at least 4 months in advance to fully explore all your options and to hedge against any upward interest rate movement.
Start treating your mortgage for what it really is, an investment, and as with any investment, proper planning leads to higher returns.
Steven Porter, Mortgage Agent and Planner with Mortgage Architects, mortgage brokerage. Steven can be reached at 1-905-875-2582 or Steven@1800Mortgages.ca.