An active spring mortgage market means that five years later there are many mortgages up for renewal.
The majority of clients initially sign a five-year mortgage term. That means that at the end of the five years their mortgages come up for renewal.
Statistics that I’ve seen from several different sources indicate that approximately two out of three Canadians break their mortgages early.
What do I mean by break?
What I mean by break is that if at some point during the five years they move, sell their home, or refinance their original mortgage they have broken their mortgage.
If you have not made any changes to your mortgage, at the end of the five-year term your mortgage comes up for renewal.
Lenders handle renewals differently. Some start aggressively offering renewal options to their clients at least six months ahead of time. Others send renewal offers at the three-month mark. Some follow up repeatedly with phone calls; others wait for the client to reach out to them.
A significant number of lenders offer a 120 day rate guarantee for clients that are approaching their renewal date.
If your mortgage is coming up for renewal it is important that you do your homework to make sure you are being offered a competitive rate.A client that had just received a renewal offer in the mail from her financial institution called me last week to talk about the rate the bank was offering her. She felt it was much higher than what she was seeing advertised online.
I reviewed my rates with her. The same lender was offering new clients in the door a rate that was almost one per cent lower. My suggestion to her was to go call the lender and see if they were able to offer a lower rate. Less than five minutes on the phone with the lender’s customer relations team and they had reduced the rate to match what was currently available for new clients.
In some cases lenders are not offering competitive rates. If so, you are able to switch your mortgage to a new lender at the maturity date.
Many lenders review their clients’ financial situations before offering renewal rates. If there have been significant changes, they may offer a higher rate to account for (perceived) higher risk. As an example, if the client’s credit score has dropped considerably or if there is a great deal of new debt they may not be offered the lowest rates available.
In some cases, clients who do have multiple loans and credit cards outstanding may find that renewal is a good time to refinance and consolidate their consumer debt. A consolidation may help reduce their monthly expenses and will over time help bring their credit score back up.
If your mortgage is coming up for renewal and you are considering refinancing to help your monthly cash flow, there are a few things you need to consider. We talk about some of these considerations in a previous post
Whether your mortgage is coming up for renewal, you are initially purchasing your home, or you are restructuring down the road, it is important to spend som.e time looking into your options.
We are happy to discuss current rates with you if your mortgage is coming up for renewal. In most cases it makes sense to stay with your lender as they will most often match rates available with other lenders. In others, it makes sense to look at switching to a new lender if the rate you are being offered is not competitive.
Take a few minutes and do your homework. An informed decision can save you thousands of dollars in the long run!