Mortgage due for renewal soon? Do you stay or do you go?
The days are gone where homeowners would commit for life to only one mortgage lender. If your mortgage is due for renewal soon, you may want to start thinking about what you’re going to do when your mortgage term ends. While you could renew with your current lender, you may be missing out on potential mortgage interest savings or better repayment options by going to a different lender.
With all of the mortgage rule changes, the good news is the majority of lenders DO NOT require that you re-qualify with them when you are planning on staying with that lender for your next term and you are not making any changes to your current mortgage amount or remaining amortization. Do be advised there are grumblings in the news that lenders MAY soon be re-qualifying borrowers at renewal date which also might involve an appraisal of the property to determine where the loan to value ratio is at. The process to renew is very simple as they will send you a renewal notice near the end of your mortgage term which will contain the different mortgage term rate offerings for you to choose from. All owners of the property are required to sign on the dotted line of the renewal agreement and return the completed form with choice of term and rate to your lender, easy peasy.
The downside is you may not have initially been offered the best rate available and you should have a look around at what other lenders are offering.
Now for the not so good news. If you are thinking of “switching” or “transferring” your current mortgage to a different lender, the new mortgage-industry rules are complicating this process for many borrowers which makes it difficult to consider taking your mortgage elsewhere if you don’t like the terms and rates offered by your current lender.
I am finding the most impactful rule change that will affect many people at renewal time is the stress test. Unless you can pass the stress test, you may have to stay with your current lender at the rate they are offering you. Better rates may be available though many simply won’t have access to them at this time. Having said that, with a renewal or transfer to a different lender, there are still some lenders who will allow borrowers to qualify at the actual contract rate instead of the current benchmark rate of 5.14%, or in the case of conventional mortgages, at the contract rate plus 2%. Do be aware some conditions do apply
Lately, I have found that a number of my renewing clients have decided to instead “refinance” their current mortgage to pay out high interest consumer debt even though refinance rates are higher than renewal rates. This way, even though they are paying a higher rate on their mortgage, the average rate charged for their overall debt load is much lower.
If you are thinking of moving to a different lender to either “renew” or “refinance”, not only will you have to complete current credit application information to re-qualify, you will also be asked the following initial questions:
- When was your current mortgage taken out?
- Did you originally put down 20% or less than 20%?
- What is your mortgage balance owing?
- What is the approximate value of your home and where did you get that estimated value from?
- What is your credit score?
- Are you looking for a fixed mortgage term or a variable?
- Do you want an amortization of less than 25 years or longer?
Still have questions? Then contact the MortgageGirlca and put her over 35 years of experience to work for you! Ask questions, get answers. Contact her via phone – 780-686-5734 or email – firstname.lastname@example.org. You can follow her on Facebook (MortgageGirl.ca), Twitter (Mortgagegirlca) or read more of her blogs at (mortgagegirls.wordpress.com)