Renewing Your Mortgage:
Shortly before your mortgage comes up for renewal you will receive a ‘renewal offer’ in the mail from your bank or lending institution. The renewal offer will have with a list of ‘term’ and ‘rate’ selections. These rate offerings will likely be much higher than discount rates available at that time.
Have you ever wondered why banks still quote ‘posted’ interest rates that are much higher than other available rates? Approximately 70% of the people who receive a renewal offer from their bank will simply sign and return it, with no questions asked. The bank is a known and trusted entity and customers believe they are being offered a ‘good rate’. Most don’t know that these interest rates are negotiable – much like buying a car. Banks understand that ‘loyal’ customers are unlikely to undertake the unpleasant task of ‘shopping’ for a better deal on their own. They make huge profits on renewal sign-backs that are at, or near, posted rates.
Renewal offers are usually sent out just a few weeks before a mortgage comes up for renewal. This gives most people, busy with daily life, little time to shop around. It’s so easy just to sign the offer, and send it back. Some people will call their bank and ask for a better deal. In most cases they will get a better rate, but not likely the lowest rate available in the marketplace.
The best way to approach a renewal is to call a mortgage broker at least 4 months before your mortgage renews. Many financial institutions offer rate guarantees for up to 120 days. A broker will shop the market for you and ‘lock in’ the best rate they can find. This protects you if rates go up before your renewal date. If rates go down, you will receive the lowest rate in effect over the 120 day period – so you can’t lose.