Most homeowners in Red Deer think about their mortgage renewal when the letter shows up in the mail. By then, much of the leverage is already gone. If you are wondering when to start shopping your mortgage renewal, the short answer is about four to six months before your term ends. Here is why timing matters and what to do at each stage.
Why Your Renewal Letter Comes So Late
Federally regulated lenders only have to send your renewal statement at least 21 days before your term ends. Some send it earlier, but many homeowners get it with just a few weeks to spare.
That is not much time to compare offers, gather documents and move to a new lender if you find a better deal. Lenders know this, and many count on homeowners signing whatever arrives. The rate in that letter is often not the best rate your lender offers, let alone the best rate available elsewhere.
The Power of a Rate Hold
Most lenders will hold a rate for 90 to 120 days. If you start shopping about four months before your renewal date, you can lock in a rate now and still take a lower one if rates drop before you renew.
It is a simple way to protect yourself without guessing where rates are headed.
A Simple Renewal Timeline
Six months out: find your current balance, rate, term end date and any prepayment options. Think about what you want next. Do you plan to move in the next few years? Do you want to pay the mortgage off faster? Do you need to access equity?
Four months out: talk to a mortgage broker. Compare your lender's offer, if you have one yet, with what other lenders will offer. Lock in a rate hold.
Two to three months out: choose your mortgage. If you are switching lenders, gather your documents and sign your approval.
Three to four weeks out: confirm everything is in place with your lawyer or the new lender so the switch happens on your renewal date.
Is Switching Lenders Worth the Hassle?
For many homeowners, yes. At renewal you can move to a new lender without paying a penalty. Many lenders cover the legal and appraisal costs on a straight switch, although your current lender may charge a small discharge fee.
There is more good news. If you are moving the same balance and the same remaining amortization to a new lender, you no longer have to re-qualify at the stress test rate in most cases. That rule change made switching much easier for homeowners whose income has not grown as fast as rates did.
If you want to add money to your mortgage at renewal, take a look at our comparison of refinance, HELOC and second mortgage options before you decide.
Renewal Is Your Chance to Reset
Renewal is one of the few times you can change almost anything about your mortgage without penalty. You can:
Choose a fixed or variable rate.
Pick a shorter or longer term.
Add better prepayment privileges.
Make a lump sum payment to reduce your balance.
Combine other debts, subject to qualifying.
Signing the renewal letter without looking at these options can cost you thousands over the next five years.
Let a Broker Do the Shopping
Jean-Guy can quickly compare dozens of banks and lenders to find you a better renewal, often putting real money back in your pocket. There is no cost to you, because lenders pay the broker when a mortgage funds. If your renewal is coming up in the next six months, now is the right time to talk to a mortgage renewal broker in Red Deer.
Apply online in a few minutes or call 403-391-2552. Save money, save time and get advice from someone who has been doing this since 2006.