Ready to navigate the renewals maze and secure the best deal for your home? As your mortgage renewal date approaches, you’re faced with the pivotal choice: stay loyal to your current lender, explore new horizons by leaving, or dive into the realm of refinancing. Each option comes with its own set of considerations and potential benefits…
Staying just means you sign back up with your current lender and keep on keeping on. The second option is to renew your mortgage (same balance, amortization period, names on title, etc.) but switch the lender your mortgage is with. The switching process is typically free or at very little cost and could potentially get you a lower interest rate depending on your loan-to-value ratio. With a refinance, you’re essentially doing the mortgage over completely. There are several reasons why you might consider either of these options, so let’s explore some important factors for each!
Staying With Your Current Lender
Although you should ALWAYS shop around for the best deal, rather than just accepting what’s offered, staying with your current lender usually just involves signing a piece of paper. In other words, staying is the easiest option, plain and simple.
You’ll want to evaluate the costs associated with switching lenders and weigh the stability and consistency provided by your current lender. There are several reasons why you might stay with your current lender, here are a few things to consider:
1. Competitive Terms: Although you should still shop around, what you are offered might be in line with what other lenders come back with in the current higher interest rate environment.
2. Familiarity & Convenience: Consider the convenience of staying with your current lender, as they already have your information and will offer a more streamlined process.
3. Relationship & Loyalty: Explore loyalty programs and factor in the positive relationship you may have already established with your current lender.
Leaving Your Current Lender
Leaving your current lender for a new one, or switching, is NOT a refinance. What you’re doing is essentially leaving all aspects of the deal the same (i.e. the balance, amortization period, name(s) on title, etc.) and moving it to a new lender. This can be advantageous because, due to certain rules and the way money is dealt with in Canada, there’s an opportunity to get a lower rate than what your current lender might offer you on a renewal.
For example, the cheapest or lowest rate will always be for an insured mortgage (someone who’s purchasing with less than 20% down). When someone either buys a home or has equity of 20% or more, the rates typically increase. When you have 35% equity or more on a purchase or switch though, the interest rates go back to being close to or the same as an insured purchase!
1. Better Rates and/or Terms and Conditions: Switching to a new lender can unlock lower interest rates, flexible repayment options, lower fees, or enhanced prepayment privileges that can lead to substantial savings.
2. Change to Your Financial Situation: If your financial standing has improved, you’ll want to explore the possibility of securing more favourable terms or being offered mortgage products that align better with your current needs and goals.
3. Enhanced Customer Service: Switching to a new lender may come with better customer service, especially if you’ve had a negative experience with your current one and this is an important consideration for you.
Refinancing to Access Home Equity
If you need to access built-up equity from your home (and more than the cash hidden in between the couch cushions!), refinancing may be the best option for you. There are several reasons you might explore mortgage refinancing and doing so is actually a fairly simple three-step process.
First, we calculate your home’s equity (its current market value minus the remaining mortgage balance). Then, we choose the best method for accessing it (e.g. cash-out refinance, home equity loan, or HELOC). Finally, we apply for the desired option with a lender and complete the application/requirements process.
How can this be strategic when interest rates are higher?
1. Variable to Fixed: If you’ve been on the variable rate ride that’s been going on for the last while, maybe you want to get off before the next increase? That right there is a reason to refinance!
2. You Need Cash: Refinancing provides a means to tap into the home equity that you’ve been building. Whether it’s for home renovations, education expenses, debt consolidation, an investment move, or just adulting!
3. Lower Monthly Payments: If you’ve built up enough equity in your home, you might actually qualify for a similar or better rate. That, plus the fact that some lenders offer refinancing incentives or the ability to extend your loan term, and now you’re saving money.
If any of these reasons resonate with you, contact us and we’ll carefully review your situation to make the most informed decision for your goals!
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