Unless a mortgage has been paid off, it has to undergo a renewal process once the current term has expired.
While some borrowers dread renegotiating their mortgage, Dan Richard Noel, a Moncton-based investment advisor and portfolio manager, says customers can breeze through the entire process and snag themselves a better rate if they take note of the following tips:
1. Start shopping around early.
Borrowers should start shopping about four to six months before their mortgage is up for renewal, according to Noel.
“Lenders will actually hold the rate for a period of time,” he said. “So if you do some shopping around, and get the lender to guarantee that rate for you, if rates go down, they’ll usually honour the lower rates.”
2. Check rates from other lenders.
It’s imperative that you check rates given by other institutions so that you know what’s out there, Noel said.
For those who’re worried that checking rates will consume far too much time, Noel said it doesn’t take too long. “It took me about five minutes this morning to go online and look for competitive rates across Canada and what’s available out there."
This way, you’ll be in a better position to negotiate with your lender.
“There is nothing wrong with getting out there, shopping around, seeing what difference you can get, and then holding your financial institution accountable, if you will, after you’ve done some shopping,” he said.
3. Don’t accept the posted rate.
Noel said many borrowers can be nervous about asking for a better rate. “Some people just are, and if they’re told this is the rate, they don’t feel like they can ask for anymore,” he said.
“But I think if you've done your homework … now you’re armed, if you will, to be able to have a conversation about what’s the best rate you can give me for my business.”
4. Hire a mortgage broker to help you.
If you don’t want to do all the legwork, it’s best to hire a reputable mortgage broker to do it for you.
“It usually doesn't cost you anything, because the bank or the financial institution will pay that mortgage broker a commission or fee for finding new clients for them,” Noel said.
5. Consider other options.
Know what options are open to you, such as fixed versus variable rates, amortization periods, and flexibility of repayments.
You should be able to negotiate some benefit for yourself there,” Noel said.
But if you’re really not satisfied, there’s no penalty for moving to another financial institution or dealing with multiple financial institutions for different services.
“A good portion of the population likes to do that, versus having everything in one basket,” he said.