Did you know that the rate you got for your Vancouver mortgage, when you first bought your home, doesn’t have to remain the same?
Mortgages always come up for term renewals, which are separate from amortization periods.
Terms usually expire every 5 years, at which point, a new agreement must be put into place. At these intervals, you can re-negotiate your payment schedules and interest rates. Or, you can shop for better offers with another lender.
Most people don’t do this; they just sign a renewal contract and end up paying thousands in unnecessary interest costs.
It’s understandable why you’d want to keep things simple and stick with your current provider. Renewing, switching or transferring a mortgage in Vancouver can be time-consuming and complicated. Plus, it’s not always beneficial for you to make the switch. But when it is, the savings can be significant.
That’s where a skilled, independent Vancouver mortgage broker comes into play
Mortgage professionals who are not tied to one bank in particular can access lenders and renewal rates you may not be able to find on your own.
These other funding sources include monoline lenders, private lenders, credit unions and alternative lenders. That is, in addition to the ‘big banks’ you’ve probably already heard of.
They also do all the calculations for you, to find out if you’ll benefit from a Vancouver mortgage transfer. And, most of the time, this costs you nothing.
Plus, you’ll barely have to lift a finger, except to provide a bit of information on your current mortgage status.
(Of course, you’ll need to sign some paperwork, pay your fees, and the usual stuff. But, the heavy lifting will be done for you.)
Timing is critical in this process (you might miss good deals if you start shopping too late). The bank or lender you’re with may not offer you the best terms you can get on the current market. They also won’t necessarily encourage you to re-negotiate; their motive is to get you to stay, using their bottom-dollar rate.
If you’re ready to find out how you can save on your mortgage interest rates by switching lenders, contact us as soon as possible. The sooner we get started, the more likely you’ll have time to take advantage of better deals, potentially saving you thousands of dollars.
Below, we’ll answer some common FAQs about Vancouver mortgage renewals, switches and transfers.
Can I increase my mortgage amount or amortization period when renewing my mortgage?
Technically, you can. However, this would be considered refinancing your mortgage, and not just switching or renewing. You can do this with your current lender, or a new one.Read more
Refinancing at the time of renewal would increase your mortgage rate, usually by 0.10% to 0.20%. The benefit to refinancing at the time of renewal is that you’ll avoid the prepayment penalty, should you wish to choose a new lender (see below for more on this). Otherwise, you could refinance mid-term, too.
Switching lenders at the time your mortgage comes up for renewal is typically done to get a better interest rate. The two strategies are used in different contexts. So the answer here should really be: “it depends.” It’s not that you can’t, it’s about why you’d want to. A mortgage broker can help you figure out the best deal for the scenario you have in mind.
Are there benefits other than interest rates to consider when renewing a mortgage?
In addition to lower interest rates, a mortgage switch can change how you repay your mortgage. For example, you can change your prepayment options and payment frequency schedules. These are important, because they’ll allow you to pay back your loan sooner. Over time, this means you’ll pay even less with these already-reduced interest rates.Read more
If you know you’ll be selling your home soon, mortgage renewals are perfect for acquiring a portable or assumable mortgage, to lock in your terms on a new property and reduce closing costs.
Renewals are also the time to consider whether or not you want to budget for big life changes, like a renovation or large purchase. The type of mortgage you have can give you an edge in these cases, with regards to your cash flow.
If you are hoping to leverage your home’s value for cash flow, there are other options for doing this. For example, there are home equity lines of credit or refinancing options. These are not dependent on your renewal dates. Contact a mortgage broker to find out more.
What are the fees involved in switching my mortgage to a new lender? What’s the catch?
Transferring your mortgage to a new lender can involve legal fees, appraisal fees, assignment fees, discharge fees, registration fees or other costs. These fees can increase your debt by about $3,000. If they exceed that amount, you will require a refinancing scenario.Read more
Sometimes, a lender will cover some or all of your transfer fees, to encourage you to come on board with them. They may also be able to fold your transfer fees into your principal mortgage balance. In other words, you can pay them off over time, with your monthly payment schedule.
Given how easy it is to work with a Vancouver mortgage broker to do this, there is hardly any catch. You’ll still come out with beneficial savings, even if it’s only a small amount. In fact, it usually wouldn’t make sense not to shop for a new lender, when your mortgage comes up for renewal.
Plus, if you received your mortgage prior to 2016, you may be exempt from having to undergo a stress test when switching providers.
This article provides some sample calculations to help you understand the real savings that can come with a mortgage transfer.
Please note: transferring a mortgage is usually not advisable if you have a collateral mortgage. However, it is still possible, though more expensive. Speak to a real estate lawyer, or a professional mortgage broker for more information about your case.
Do I have to wait until my mortgage comes up for renewal to make a switch or transfer?
You don’t have to wait to make a mortgage transfer, but it may not be advantageous to rush this process. There are fees associated with breaking your contract with a current lender or bank. This is called a “prepayment penalty.”Read more
If you wait until your term comes up for renewal, you can avoid paying the penalty. However, ‘regular’ transfer fees will still apply (with the same possibility of terms noted above).
Now, sometimes, paying a mortgage prepayment penalty is still worth it to get a lower rate. That is, if you’re looking to save money over the long-term. It may also lower your monthly payments.
Remember: all lenders are in this to make money off of your interest accruals. Any deal you get has to benefit them in some way. If they put up hundreds of thousands to pay for your home, they’ll want to know they’ll have your business, and a guaranteed return, for several years. The renewal window is built in to give you the chance to shop around at reasonable intervals. This keeps the market competitive.
That said, mortgage brokers are well-versed with the options that one can get with renewals and transfers. Using a trained professional can ensure you’re not miscalculating your fees, or missing out on better rates – whether or not you switch at renewal time, or in the middle of a term.
Contact us today, if you think a mid-term mortgage switch is what you need. We can also advise on other options, which you may not yet be aware of.
When should I start shopping for a new lender to switch out my mortgage for better rates?
Your mortgage renewal offer can’t be delayed with your current lender. So, to ensure you have ample time to shop the market and negotiate a new deal, you’ll want at least a 4 to 6-month buffer period before your scheduled renewal date.Read more
Remember: your current lender will want you to stay with them. So, they won’t give you a lot of notice that your mortgage is coming up for renewal (it’s usually 2 to 3 months beforehand). You must be proactive in keeping up-to-date with your mortgage schedule, if you want to re-negotiate without penalties.
If you worked with a good mortgage broker in your first term, they will likely reach out to you when it’s time to start looking at renewals.
Transferring a mortgage to a new lender will still require an application process, and possible stress tests, just like when you first applied for a mortgage. So you’ll want to give yourself time to get this ‘homework’ done. You’ll need to prepare bank statements, plus proof of income, ownership and home insurance. You may also need to schedule an appraisal for your home.
More importantly, when your mortgage broker has ample time to do their due diligence for you, you’ll know they’ve thoroughly shopped around on your behalf. You can rest at ease, knowing you got the best deal possible.
Don’t wait! A Vancouver mortgage renewal switch can save you thousands!
If you know your property is coming up for renewal, our advice is to not delay. You have nothing to lose by contacting a mortgage broker to get this research started for you.
We’ll guide you through the next steps, and advise on whether or not a mortgage renewal or transfer will benefit your case.