Thursday, February 15, 2018

Renewing your mortgage? Here’s what you need to know

Consumers are much more informed these days about mortgages and mortgage products, and are highly engaged, especially millennials who are comfortable searching the Internet for information and rates.  According to the Canadian Mortgage and Housing Corporation’s (CMHC) 2017 Consumer Survey, 76% of mortgage consumers did online research, and 31% access online information through their mobile devices.

Among those going online, 50% went to lender websites, 25% to broker websites, and 15% visited both lender and broker sites.  Seventy-six per cent used a mortgage calculator, 51% did a financial self-assessment, and 29% filled out an online pre-approval form.

Because consumers are highly engaged, they are more confident about their mortgage decisions. Still, with all that research, more than half contacted a mortgage broker to get further clarification.

According to the survey, mortgage broker share of the market is increasing with renewers, from 26% in 2016 to 35% in 2017. This is a prudent move, considering how much the mortgage rules have changed.

This may be the year you get that renewal letter in the mail. Many of you may just sign the new renewal rate because it’s easy, and the idea of switching to another lender may be too onerous. You are busy with work and family and don’t have the time to do the research to see if there may be a better deal for you.

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 as you can. 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:

·       Get going early. Start the discussion 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.

·       The posted rate is usually not the best. Often, depending on your lender, you’ll get the posted rate, not the discounted rate, as a renewal rate. A report by Mortgage Professionals Canada found that renewers working with a mortgage professional saved approx. 2 points below posted rates. That can translate into thousands of dollars in savings.

·       Do your homework. Shop around to get 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.

·       Why a mortgage broker? Most surveys find that brokers can get you a better rate because of their relationships with multiple enders. A broker can give you independent advice because they are not tied to one lender. A broker can also save you time with one-stop shopping. And there’s no cost to you.

In some cases, the new rule changes may necessitate that you stay with your current lender at renewal time. A broker can help assess the situation and provide advice, even if that means staying with your current lender.

The bottom line is that research is equally as important at renewal time as it is when purchasing your new home.  Don’t leave it until the last minute.