Mortgage Transfer

Many people have a pretty good understanding of how the mortgage process works at the beginning. You apply, collect the necessary documents, put up your down payment, sign up for a 5 year fixed or variable term and off you go (obviously it is a little bit more complex, that is just the coles notes version). But what do you do once your 5 year term is expiring and your mortgage matures? This is known as the renewal process, and this is when you have a few different options and you should know how to navigate them properly.wallet 1

Since your mortgage is maturing, this is an opportunity to reassess your situation and if you need to refinance, now is the time as there is no penalty to break the mortgage seeing that your term or contract is now up. This is usually how the process works:

About 3-4 months prior to your mortgage maturing, you will begin to receive notice from your existing mortgage lender about renewing your mortgage with them. At this time, you should start looking at your options and asking a few questions:

  • Are you happy with the service you have been getting with your current lender?
  • Are they offering you a competitive rate?
  • Do you need to take out extra money from your equity to pay out debts, to refinance, invest elsewhere or any other reason?
  • Has there been any major changes since the time of your last mortgage or will there be in the near future? Like a growing family? New job or loss of job? These are things you need to consider.
  • Are you planning to move or sell your home in the next few years?

If any of the above apply to you, then you may need to look at some other options rather than just a straight renewal.

Potatoes

What exactly is a renewal?

A renewal is basically just signing up for more or less the same mortgage for an additional 5 years (or whatever term you select). If you have a good relationship with your existing lender, they will offer you the chance to simply sign the renewal and continue your mortgage with them at a rate comparable to what is available on the market at the time.

Pros:

The process is very easy and fast. You typically will not have to go through the application process or pay any closings costs. Just sign and go.

Cons:

Often times, people will just blindly sign the renewal form without looking at their options. Knowing this, banks will sometimes offer the renewal at a slightly higher rate than you could be able to get on the open market. You cannot take out any additional funds either.

What to do?

If you see that the rate they are offering is not in line with what others are offering, you have a couple options.

  • Call your lender and try to negotiate.
  • Ask your mortgage broker to try and find a better rate elsewhere and do a “switch” mortgage. This is just taking your existing mortgage amount and transferring it to a new lender without any closing costs.

What if you need more money?

If you need to take out some equity for one of the reasons above, then a renewal may not be a good idea. However, this is still the best time to do a refinance as there is no penalty to break the mortgage. If your mortgage is maturing, that is the time to think about this.

So, in conclusion, a renewal can be good for you if you are happy with the rate being offered and do not need any extra money, but even in this scenario it is always a good idea to review all your options. Speak to your broker who arranged the original mortgage for you, they will help you go over all your options and direct you in the best direction.

 

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Have any questions, need any advice? Visit us at www.thefinancialforum.ca. Email us at mortgages@thefinancialforum.ca. Call us at (877) 335-4486.

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“Your Connection To A Better Mortgage”

Together, We Make Mortgages Easy!

As a mortgage broker, mortgage renewals and mortgage transfers is an area I spend a lot of time with. It’s important, very important. Most clients understand this, but many simply fall into the trap of “auto renewing” with their existing lenders without planning or consideration of all their requirements and options.

Yes, you will likely receive a letter, phone call or both from your existing lender (or you should). However, most if not all of these offers are simply to extend your mortgage term at the now prevailing mortgage rates for the new term of choice. They do not discuss or review your current requirements, short and long term goals and adjust the mortgage as required. More importantly, the offer you receive is rarely the best rate available. So, let’s slow this down a bit and consider.

First, never automatically take the offer provided by your lender from the onset. Statistically, most borrowers do not take the time to re-evaluate their options and shop for best rates, terms and conditions as they did an inception. Your lender “knows” this statistic very well and prices the renewal accordingly. You not only may be able to negotiate a better deal elsewhere, but likely, even with the existing lender that can be much better than the original renewal offer. Being too busy or “can’t be bothered” at renewal is never a good idea.

Second, renewal time is the time to have a look at your overall financial picture. Are you better off financially, have rates dropped or increased since you took out the mortgage, do you need additional funds for debt reduction, renovation, kids tuition, etc. Plan this out. You may be able to decrease your amortization and pay off your mortgage that much earlier. Borrowing for debt reduction could save you thousands. Not to mention, if you save .20, .30, .40, .50% on your renewal from your first offer, that would be extremely impactful as well.

Lastly, if you do need to switch lenders, in most cases you will have a no cost, no fee transfer. It’s a simple transition. If you do need to refinance to secure some extra funds, well you will incur some legal fees and possible appraisal costs but nothing in comparison to having to open the mortgage early to refinance in mid-term. I am not a fan of switching lenders for the “sake of”, however, it is important to consider all options at renewal time.

Have any questions, need any advice? Visit us at www.thefinancialforum.ca. Email us at mortgages@thefinancialforum.ca. Call us at (905) 265-0246.

VERICO The Financial Forum Ltd.

“Your Connection To A Better Mortgage”

Together, We Make Mortgages Easy!