The first thing you should do when you get your mortgage renewal documents in the mail from your current lender is call one of our mortgage planners. Mortgage renewals should be treated with as much decision as when you originally took the mortgage. Banks thrive on renewal customers to increase their bottom line. You see they already have you as a customer, they don’t have to pay a staff member or broker to keep you (because they don’t have to do any paperwork, other than send you the two page renewal letter) and they don’t have to hire any additional staff to assure your ongoing service. And (this is the big one) they will almost never offer you the best rate they could offer you. Historically a large percentage of Canadian mortgage customers accept the renewal terms from their current lender for one of two reasons: 1) it is very convenient, 2) they feel as though the lender must have their best interests in mind. In the case of reason #1 they are correct, it is extremely convenient to read the mail, sign on the dotted line and mail it back to the lender. We think that what we are about to show you regarding reason #2 will make you think twice about reason #1.
Nice lender……….but not nice enough
It would be a generality to suggest that all lenders do not have your best interests at heart, that simply isn’t true. Some of the lenders out there do not have posted rates (these are the significantly higher rates offered by some lenders as their “best” rates), but rather only offer discounted rates. Depending on the economical factors, lender cost of borrowing, and many other factors these discounted rates are often 1 to 1.5% lower than posted rates. These lenders do a very good job looking out for your best interests and are likely worthy of your continued business. That still does not mean that you are getting the best option for your financing. You see the lender you are currently with may offer you their posted rate (not a good option) or they may be one of the “nice lenders” offering you their discounted rate (better option), however their discounted rate may still be significantly higher than a lender that we may be able to switch you to.
If you had $250 000 owing on your current mortgage that is now five years into the original 35 year amortization (which means you would now have 30 years remaining) your Axis Mortgage planner may be able to save you $3 038.14 over the next five years of your mortgage by allowing us to move you to a lender whose rate is ¼% lower than your lender is offering. It is not uncommon to see this scenario. Many of the lenders who are the “nice lenders” are still ¼% higher (or more) than some of the competitors we can access for you.
If you renewed with your current lender for five more years at 4.90% your new monthly mortgage payment would be $1 319.34 and your total mortgage payments over the life of the new mortgage would be $79 160.40. At the end of this new five year term you would still owe $229 081. By allowing one of our planners to find a lender that is offering 4.65% your payment would drop to $1 282.45 per month and the total mortgage payments for the term would equal $76 947. At the end of this five year term you would owe $228 256. The total monthly savings would be $2 213.40 and the extra equity you have is $825 for a total savings of $3 038.14. I am sure you will agree that a little paperwork and time spent with your mortgage planner is worth over $3 000.
The truth about the not so nice lenders
So we know that some of the lenders are offering a very competitive, and in some cases your best interest rate at renewal time, but these situations are often few and far between. Most lenders are offering the posted rate or close to it. The following example really needs no convincing.
That same $250 000 mortgage offered at a posted rate of 5.90% will yield a monthly payment of $1 471.46 which is $189.01 higher. Over the 60 months of your new term that is equal to $11 340.60 in extra payments. And you still owe $232 138 instead of $228 256 which is an additional savings of $3882 for a total savings of over $15 000.
You may be thinking this is too good to be true, but it is in-fact better than good and is absolutely true. In almost all cases the new lender that has earned your business will pay for any appraisal costs, legal costs or transfer costs. You will be required to provide the required documents to the mortgage planner and lender, however you will not be charged for any expenses. Now if the $15 000 savings wasn’t incentive enough, this has to seal the deal. Please do your self a huge favor and call us before you just settle for the convenience of signing those documents.