It’s tempting to sign the renewal letter and be done when the mortgage is up for renewal. Make sure you do some homework before renewing your mortgage. Ensure you’re getting the the best mortgage renewal rates with these top tips to make sure you don’t miss any savings or opportunities:
1. Do your research on rates
Which mortgage rate is lower than what you currently pay? Do they differ? Is it getting higher? By knowing what rates your competitors are offering, you’ll be able to gauge how much negotiation room you have (since you definitely have room to negotiate mortgage renewal rates Ontario.
2. The posted rate may not always be the lowest rate
Banks are businesses like any other, and they’re simply here to make more money. Think of the posted rate as the rate the bank is attempting to sell you on (to gain as much profit as possible from the interest you are paying). There is usually an option to negotiate the rate down. So do not be afraid to do so.
3. You might not always get the best deal
Saving money on your mortgage doesn’t necessarily mean you’re getting a better deal. Hence, it is important to read the agreement before signing – or simply ask your lender how the lowest rate is associated with penalties.
Are you sacrificing your ability of making extra payments by accepting the lowest rate? If you break your mortgage early, what are the penalties? If you receive a windfall or a gratuity payment, what are the penalties?
4. You should keep your payments the same if you get a lower rate
Why would you negotiate a lower interest rate if you had to pay the same monthly amount? But you know why. It is likely that your cash flow would not increase much by lowering your monthly payments.
Even though your payments are the same, keeping your lower interest rate means that your mortgage is paid off earlier.
5. You should add a little extra to the principal every month
Since there are no prepayment limits at renewal time, it is the ideal time to pay off your mortgage in full. Using this method, you can substantially reduce your amortization and help you save in the overall interest costs since every dollar goes towards reducing the principal.
You may be able to make a huge overall payment at mortgage renewal time if you have recently advanced in your career or consolidated your debt.
6. Don’t be afraid to switch lenders
It can be difficult to break up – or at least that’s what a few lenders might lead you to believe. To switch your mortgage to a new financial institution, you may even be asked to pay a huge discharge fee.
However, don’t let a lack of courage stop you from doing what you believe is right. You can usually expect your lender to absorb the discharge fee into your new loan. The minimal fees for securing a loan that offers a much better rate or more flexibility.