Monday, June 03, 2013

Save at renewal time by using a mortgage broker

Consumers are becoming much more informed about mortgages and mortgage products before taking the plunge into home ownership. According to the Canadian Mortgage and Housing Corporation’s (CMHC) 2013 Consumer Survey, 70% of buyers researched terms and conditions, 60% discussed the pros and cons of various mortgage products with professionals and 59% compared interest rates.

Because consumers are highly engaged, they are more confident about their mortgage decisions, according to the survey. Still, with all that research, more than half contacted a mortgage broker to get further clarification. This is a good move, considering how much the mortgage rules have changed over the past few years.
The survey also found 81% of buyers were totally satisfied with the experience with their brokers and would most likely use that broker again. An overwhelming 75% would highly recommend their broker to family and friends.
A study recently released by RBC Economics found that low mortgage rates have helped make owning a house largely affordable in the first quarter of 2013, with low risk that rates will move up sharply.  It’s likely that this low interest rate environment will go on for the next two years. 

The year 2008 was one of the biggest years for mortgage originations in Canada. That means a large percentage of those mortgages are now maturing. Discounted variable rates were popular and those discounts no longer exist, so those mortgage holders will be facing increased mortgage costs.  For most homeowners, their biggest monthly expense is a mortgage payment. Yet the CMHC survey found that 39% of households automatically renew their mortgages when the term is up instead of trying to find a better deal.

When you’ve done your homework prior to purchasing a home, it only makes sense to do as much research at renewal time. Quite often the renewal rate offered to you by your lender is higher than the market average.
There may also be material changes in your household. Perhaps you’ve started a family, or one of you has been promoted.  This is another good time to contact a mortgage broker to review your financial situation and see what makes sense for you to do.

Here are some tips to make sure you’re getting the best mortgage product for you:

  • Get going early. Contact your mortgage broker four to six months ahead of renewal time. Most lenders will guarantee a discounted rate for four months but your renewal agreement is usually sent only 30 days ahead of your maturity date.
  • Do your homework. Let your mortgage broker shop the rates for you and get you the best deal, tailored to your particular situation. If you decide to switch lenders, there are no penalties at renewal time.
  • It’s not always about interest rate. Don’t fixate on rate. There are other options that may appeal to you such as changes to amortizations or changes to the rate type. 
  • Let a broker negotiate on your behalf.  If you don’t like negotiating and don’t have the time to do the research, your mortgage broker will do the legwork for you. Homeowners who use a broker at renewal time usually pay less than those who don’t use one.


  1. Very Enjoyable! I hope you write more on this subject!

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