Hedge your bets when it’s time to renew
Ask tough questions, compare rates and read the fine print before signing new mortgage
No one likes homework, but when it comes to mortgage renewal, doing a little research pays off.
“Not completing the proper legwork will do a major disservice to your wallet,” says Robert McLister, founder of RateSpy.com, an online Canadian mortgage comparison site based out of Mississauga. “The more intelligence you can gather, the more likely your chances are of finding the best deal.”
In addition to taking time to compare rates from various financial institutions, McLister recommends searching for the right professional to help guide you through the renewal process.
For one thing, he points out, mortgage products are not one-size-fits- all. For example, many deep-discount products have terms and conditions that could prevent borrowers from acquiring a future line of credit or limit pre-payment privileges.
David Fleming, a Toronto-based sales representative with Bosley Real Estate, says consumers should also know that just because a product has a low rate doesn’t mean it offers the best deal over the long term.
He also advises knowing whether your mortgage is portable or what, if any, break fees you would have to pay. “Not properly examining these small details could be financially crippling to consumers, taking out their entire return,” he says.
With the recent announcement that Bank of Montreal and TD Bank are lowering their five-year fixed mortgage rate to 2.79 per cent, Fleming believes consumers should consider locking in now.
“Don’t get greedy,” he cautions. “It is ludicrous how low the rates are right now. Still, there are some con-
“The more intelligence you can gather, the more likely your chances are of finding the best deal.” ROBERT MCLISTER RATESPY.COM
sumers who are sticking to a variable mortgage rate because they think there is still money to be made. That’s a big gamble.”
Given the current low-interest environment, Jim Murphy, president and chief operating officer for the Canadian Association of Accredited Mortgage Professionals (CAAMP), says Canadians should see this period as an opportunity to pay down their mortgage more quickly, rather than to take on a larger mortgage that puts an unnecessary strain on household finances. “Consumers should always be mindful of their own personal finan- cial situation,” says Murphy. “Overall, we believe that Canadians are behaving prudently.”
Alyssa Richard, the Toronto-based founder of online comparison tool RateHub.ca, says homeowners with existing mortgages need to ask themselves, as well as their mortgage provider, some tough questions.
Such as? Richard suggests you think about whether you plan on staying in the same house for several decades or will you want to sell in the shorter term?
Also, she says when renewing a mortgage, clients should ask their provider to compare and contrast different policies they have compiled during their research.
One of your key questions should be, “These are the rates I’m seeing online, how is what you are quoting me different?”
Richard is also a strong proponent of doing your homework before signing anything. In her experience, too many clients take a laissez-faire atti- tude to their mortgage and assume their current financial institution is offering up the best deal.
A2011survey by Manulife backs her up. The study revealed two out of three Canadians surveyed simply stay with their current mortgage provider and do not try to negotiate a better deal when up for renewal.
“Go out and get multiple quotes,” advises Richard. “Don’t just automatically sign the renewal letter.”