Saturday, August 27, 2011

Mortgage Renewal

You can view all my videos on You Tube at HamiltonBroker.

I have already made a post on the mortgage renewal letter but have decided to add to it, because I feel some important points were missed, also I added the video.  Some people don’t take this very seriously and it is a real shame because the amount of money they are losing out on.  When you think about it, what is a $50 or a $100 difference in a monthly mortgage payment if you just accept what the lender offers you?  Well it’s $600-$1200 a year or $6,000 over five years.  What does paying that extra money do for you?  Absolutely nothing except drain your pocket, your retirement, kids’ education or whatever.  Money down the toilet!

What is interest?  It is the cost of borrowing, that simple.  The cheaper it is to borrow money, the more money for other things.  It amazes me to see someone clip coupons to save 50 cents on a pound of butter, but yet when the renewal letter arrives from their lender they just sign it and send it back.  How many coupons do you have to clip to save $6,000? Even if it is just a small difference of $500, it is still worth it to consult with a broker.

What does it cost to switch lenders at renewal time?

About $250, especially if your mortgage was default insured by CMHC, Genworth or Canada Guaranty (formally AIG).  The $250 is a discharge fee that your current lender charges to remove the mortgage from the title of your home.  If it is not insured there may be an appraisal fee around $350.  Some of or all of these expenses may be covered by a new lender or your broker, depending on the amount of your mortgage.  If you are going to have to cover all these expenses and your savings are not going to be high enough, you may just want to stay where you are.  That does not mean you cannot negotiate with your lender.  It is ok to call a mortgage broker and explain that you want to know what the going discount rate is right now.  Then call your lender back and ask for that rate.

How do you get the best mortgage rate at renewal?

The best thing to do is actually contact a mortgage broker 4 to 5 months prior to your mortgage renewal date and ask them to keep an eye on rates for you.  Even fill in an application and authorize the broker to do a credit check when they are actually going to submit your mortgage application.  We will hold on to the application and wait for the right moment to submit it.  Occasionally lenders have sales on rates just as department stores have sales, which can turn into huge savings for you.  Basically you are hiring a broker to nail down the best possible deal for you over the course of four months.  Watch out for brokers who do not use multiple lenders, make sure you call a high volume broker that uses at least 8 to 10 major lenders.

A new ploy that some lenders are using to trap people into the any rate that they want is by waiting 2 to 3 weeks before your renewal date to send you your mortgage renewal lender.  This is in hopes that you are not paying attention and will not have enough time to find a better rate.  All we really need is one week, so don’t be concerned if you contact us a little late.  Be pro-active, it can save you a lot of money.

As always you are free to contact me anyway that works best for you.  On weekends and evenings there is better chance of contacting me by email.
Ron Miller


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