Renewing a Mortgage?
Don’t be too hasty in signing that renewal form and sending it back to the lender. Are they offering you a good deal? How do you know? Let me review your offer before you sign so I can give you a second opinion. There may be a better option. Lender ‘specials’ and mortgage products are constantly changing. I track these offerings full time.
It may be in your best interest to consider a switch to a new lender at maturity. This way there are no penalties incurred while giving you access to a whole new suite of products and rates. There may be ‘specials’ we can take advantage of that will save you interest. I can take care of all the details for you to ensure you are getting the most competitive rate that is right for your needs. Let me do the work for you.
What Happens Legally When You Switch Lenders?
Most people are unaware of the legal effect of switching lenders. When you switch your mortgage, you are essentially starting the process again. As such, you should treat this as just as important a process as the first time you arranged the mortgage. Your situation may have changed since then, and you may require a different product with different terms to best suit your situation.
In most Provinces a switch of the current or lower balance to a new lender requires only a simple assignment of interest on the mortgage, to be executed by all parties and registered on title. This assignment also attaches the specific terms that will have legal effect, and replaces those of the transferring institution. All of the terms and conditions registered by your previous lender will be completely replaced by those of your new lender under the assignment of interest. In most cases, the lenders can capitalize any legal fees.
Call me to guide you through this process!
Financing Strategy For Renewing
As an experienced homeowner and borrower, you are probably already very familiar with the mortgage products and services of your current lender. It could be to your advantage to use another lender. Contact me today to help you make the switch. As well, here’s some important information to keep in mind:
What Type of Mortgage Should You Choose?
Today, more than ever, there are numerous mortgage options available. Don’t be confused.
I can help you find the best product for your needs and negotiate you the best rate. I do the research for you, enabling you to avoid the frustration and confusion of having to do it yourself, and explain the available options.
Terms and Payment Options
Short-term risk and variable
Fixed-rate: 6 month, 1, 2 & 3 year (open, closed and closed-convertible) 4, 5, 7 & 10 year closed
Variable-rate: 3, 4 and 5 year (open, closed, closed-convertible and capped)
Split-term: Combination of all possible terms (6 month through 10 years)
Self-directed RRSP: A specialty mortgage rate — term optional — within CMHC guidelines. Invest your own RRSP funds into all or part of your home mortgage.
What Terms and Payment Options Should You Choose?
It all depends on what you want. I will assess your personal situation and needs to find the best mortgage for you at the best rate.
Short-term risk and variable
If rates are low and stable, and/ or you are prepared to take a risk, you can generally pay a lower rate with a short-term mortgage. You simply roll over your term every 6 months, or float your rate against prime, with the option of locking in to a longer term at a later date. This is not for everyone, however, as sudden upward rate movements can have a significant impact on your payments. You may want to discuss this with me
Any term 3 years or longer is considered “long term” in today’s economy. Because long-term rates are usually higher than short-term rates, you may not want to choose this option .On the other hand, by locking in you will avoid exposure to rate increases. You'll have the comfort of knowing exactly what you payments will be and you'll be able to manage your budget accordingly.
A mortgage which allows you to minimize — or hedge — your interest rate risk by splitting your mortgage into u to 5 parts. For example: A $150,000 mortgage could be split into five $30,000 segments with terms of 6 months, 1, 2, 3 and 5 year terms negotiated at today’s best rates. The average rate would rise or fall much more slowly than changes in the market, however, as only the shorter terms are affected by even the most volatile rate movements over the first few years. Confused? Talk with me.
Many lenders allow you to make a lump sum payment — usually 10% to 20% of the original principal balance. In addition, many mortgage products now include a “double-up and skip-a-payment” feature. This lets you “bank” extra mortgage payments for a rainy day, at which time you can “skip” them if you need to. Ask me to advise you on your options today!
Most mortgages now allow the amortization to be adjusted by increasing the payment on closed terms by 10% — 20% per year, once annually.
Most mortgages now come with the option to pay your mortgage at a frequency that matches your cash flow — weekly, bi-weekly or semi-monthly. The added benefit of the “accelerated” weekly and bi-weekly payments is that by dividing a regular monthly payment into two or four respectively, and deducting it at the new interval, an extra two payments a year is made directly against principal. The surprising effect of these extra payments a year is to reduce the amortization of the average mortgage by approximately 5 years, with cash savings at the end of the mortgage term.