Mortgage Renewals – Three Things Your Bank Doesn’t Tell You About
By Paul Hudson www.paulhudsonmortgages.ca
What’s the best rate I can get today? This is one of the most common questions I am asked as a mortgage broker, albeit a good one. More than anything this question is an excellent opener to an informative conversation about how you can make your mortgage work to your advantage.
As I have professed before, there is a lot more to your mortgage than rate, primarily the “terms” of your mortgage tend to be what allow you to make significant gains in debt elimination. In addition to preferred terms, what is typically overlooked or simply not available by your bank are three important mortgage renewal strategies that allow you to become mortgage-free sooner.
How To Take Advantage of Rate Decreases – Once you are within 120 days of your mortgage renewal date, your bank will contact you suggesting you early renew before rates increase. This typically guarantees the bank five more years of business from you, with little effort on their part. But , what if rates decrease during that 120-day window instead of increasing? In a perfect world the banks would give you a 120-day window that protects your rate from increases while providing you the opportunity to take advantage of decreases as they present themselves. Unfortunately, banks will only give you a maximum 15-day window if you are lucky. A mortgage broker, having access to multiple banks competing for your business, is in a position to hold renewal rates for 120 days for you, allowing you to also take advantage of rate decreases, instead of rushing you into an early renewal.
“Super-Accelerated” Payments – This is a term I have coined. It describes the concept of accelerating an already accelerated mortgage payment. For example, if you choose biweekly-accelerated payments, you can further accelerate these payments each time your mortgage is renewed by simply choosing the accelerated option again. Biweekly-accelerated payments work on the premise that you pay 13 months worth of payments within a 12-month period. “Super-accelerated” means you are not only paying the equivalent of 13-months, but also doing so with slightly higher payments toward the principle amount you borrowed (and therefore paying even less toward interest) .
Why An Annual Mortgage Review Is So Important – Your bank and your investment advisor are adamant about providing you an annual review when your investment portfolio exceeds $100,000, to ensure you are on track with your investments. Does it not make sense your mortgage be reviewed annually to make sure you are on track with paying off your debt? An annual review with your broker is an excellent way to ensure you are taking advantage of your mortgage terms and features, such as paying 20% or more down in one year. However, it’s also an opportunity to assess where the mortgage market currently is. Are better rates and term available, that your can take advantage of before your term is up for renewal? Do you have borrowing needs that can be better met with products and services your mortgage broker can provide? Does a spouse or cosigner need to be added or removed from the mortgage or title of the property?
Choosing to take a leadership role when it comes managing your mortgage is what gives you the upper hand when negotiating with a lender. These strategies mentioned above are simple yet powerful ways for you to take control of your finances.