Before you pay off your mortgage, it’s more than likely that you will need to renew it at least once. You will normally get a renewal letter from your current lender to review and sign. Whether it’s because you have come to the end of your mortgage’s term and still have an outstanding balance, or you are looking to get a better mortgage rate, the renewal process can feel a bit stressful. Our Ottawa mortgage broker team has helped many homeowners with their mortgage renewal and has some tips for making the process less stressful for you.

Your Financial Goals

The first thing to think about is what your financial goals are to be sure your current Ottawa mortgage provider is offering you new terms that suit your needs. Some things to consider are whether you will be moving before the end of your next term if you have extra funds and are able to get the prepayment options you want and whether it would be better to get a Home Equity Line of Credit rather than doing a refinance.

Shop Around

You don’t have to go with the renewal package being offered by your lender if it isn’t the best option for you. It’s always a good idea to do some comparison shopping a couple of months before your renewal. You can actually renew your mortgage 120 days before the maturity date of the loan. If you find a better deal with another lender, you can either ask your lender to match that deal or go with a new lender.

Get a Better Rate

The rate you are given on your renewal slip may not be the lowest rate that you are able to get from your lender or from another lender. Negotiating for a lower rate could save around $300 a month by getting a better rate, especially in a climate where mortgage rates will be rising. One way to find the best rate for your needs is to use a mortgage broker. Your credit report is only pulled once and you will get a list of lenders, and their rates, who would work with you. You can also ask for a rate hold if you want to give your current lender a chance to match that better rate. Usually, a rate hold can last for up to 4 months.

Switching Lenders

If you are thinking about switching lenders, it’s important that you give yourself plenty of time to shop around. The earlier you do this, the better chance you have of securing a better mortgage package. Also, keep in mind that it can take a bit of time because you will need to submit a new mortgage application and documentation to the new lender.

Interest Rate Risk

While shopping around for a better rate may seem time-consuming and like a lot of work, the money you could save in the longer-term pays off. It also means you aren’t leaving yourself vulnerable to interest rate risks should your new rate be higher than previously. This means you would end up paying more each month and put further pressure on your finances and budget. Here are a few scenarios where you can be affected:

  • If you have a variable rate mortgage, a rise in interest rates will affect you immediately.
  • In many cases, the lender will offer you the same rates that you started with. If your current mortgage has a fixed rate of interest and is coming up for a renewal, you could end up paying a higher rate if the market has seen a drop in interest rates.
  • Having a HELOC with a variable interest rate also leaves you vulnerable to rising interest rates.

All of these scenarios could mean adding hundreds to your monthly repayments. This is why it pays to do a bit of shopping around when it comes time to renew your mortgage. If you have questions about your renewal options, give our Ottawa mortgage broker team a call today!