Mortgage renewals are a very important part of home ownership and making sure you’re still in a suitable product with a competitive interest rate are a couple of the biggest things to consider at this stage. This guidepost should help you feel secure at renewal.
6 Months Prior to Renewal
It’s starting to come up, but you’re not pressed for time yet either. It’s at this point where you should be considering some of your long-term goals. Are you going to want to move in the next few years? Is your home going to be big enough? Too Big? It’s a great time to re-evaluate because you can find a term that works best for you to avoid or mitigate potential penalty fees from exiting your mortgage early. It also doesn’t hurt to reach out to your mortgage professional to see if an early renewal may be beneficial.
120 Days from Renewal
At this point it’s in your best interest to get start working with your broker or mortgage professional, odds are they will be contacting you at this point if you haven’t reached out to them. There are a few reasons to jump on this early:
· You can get a rate lock now for your renewal date, this secures you the best rate between now and your actual mortgage renewal.
· If you need to make changes like a refinance or transfer it ensure there won’t be any delays or extra charges.
· You can take your plan and execute. With time to breathe and you won’t feel rushed.
It’s good to be ahead of the game. It can save you a lot of money as sometimes once it gets very close to renewal there can be additional fees that come up such as your mortgage sitting in an “open” state while the new mortgage terms are finalized. For example, a refinance from start to finish will generally take 3 to 4 weeks depending, so it’s always best to start early.
Also, if you deal with a major bank, when you get that renewal document in the mail from them it’s best used as fire starter. They purposely send rates well above what is competitive because 25% of clients will sign it and move on. Don’t be that guy.
Fun Fact, a study completed found that loyal customers to their bank get rates 10 points higher on average than the fellow that just walked off the street with no prior business with them. Shopping around can be your best way to secure a great rate. Or you can partner with a mortgage broker that can do all the shopping for you.
Renewal Day
Great! That’s all done for another 5 years (or another length depending on suitability). Give yourself a pat on the back for a job well done and have a celebratory drink. Whilst renewals aren’t nearly the work purchasing your home was, it’s still a task to get it done and it always feels great knowing your mortgage is secured again at a great rate and with terms that match your lifestyle.
Other Tips
A few other things you should consider during your renewal process:
· If you’re with a major bank, you need to negotiate your rate. They won’t offer you a competitive rate out of the gate. They want you to be a pushover and sign their initial offers. If you’re not comfortable with that, hire a mortgage broker to do the negotiating for you. It’s free and effective.
· If you’re with a Monoline you’re going to get offered a market best rate or a rate under market rates at the time. They want to retain your business and care less about the spreads and more about keeping their clients happy and on the books.
· Always reach out for professional advice at renewal time. It’s free, and there’s professionals in the industry for a reason. It can save you thousands of dollars and prevent future headaches from signing something with bad terms.
· Early renewals happen all the time and can result in a lot savings and improved cash flow. If you have a question, make that quick phone call and see if there is something better for you.
At the end of the day there is a wealth of information available online for someone with the time to do all the reading and deciphering to negotiate a good rate for yourself at renewal. Remember that loyalty gets repaid with higher rates, so negotiate. If you want to avoid all this hassle, then get yourself an independent mortgage broker who will do all the work for you free of cost. It pays to be an informed consumer.