Loan Articles

Your mortgage payments make a large part of your monthly expenses. At the same time, close to 30 percent of borrowers choose to renew their mortgage. If you are one of them, it pays to explore your options.

Tips to Reduce Your Payments

The most important thing is to plan ahead and shop for an attractive rate 3 – 5 months in advance. Look at the rates that other financial institutions offer before you negotiate with your current bank. Then ask your loan officer whether they can match the interest rates offered by competitors.

Hiring a Mortgage Broker to Do the Work for You

Many people renew with their financial institution, but you may want to consider switching if you are offered better terms. There are no penalties if you do this at renewal time. If you don’t have the time, are not good at negotiating, or don’t feel like doing it, using the services of a mortgage dealer is an option to consider. The good news is that most brokers offer this service free of charge. They are paid a commission by the financial institution. There are benefits to hiring a broker – you are likely to get a less restrictive mortgage and more attractive interest rates. You will save money in interest charges and will get a flexible solution.

Renewing at Maturity

Some people choose to renew at maturity. Financial institutions such as the Canadian Imperial Bank of Commerce offer the lowest interest rate posted during the last thirty days. This is provided that you opt for a fixed rate loan. Generally, a fixed rate solution is a good choice for customers who are looking for predictable monthly payments. They are protected against interest rate fluctuations in case the rate goes up.

Attractive Offers before the End of the Term

Another option is to renew your loan as early as 4 months before the term is over. Some financial institutions feature attractive renewal offers to keep their existing customers. Whether the term is 10 years, 5 years, or 6 months, you will receive a renewal agreement provided that you qualify. This is the time to consider your options and whether your monthly payments are affordable. You still have enough time should you decide to switch lenders.

Switching Lenders

There are many benefits to switching to a new deal, and one is that most financial institutions do not require a valuation. What is more, there are no legal fees, and the whole process is simple – renewal is easy to arrange. Customers are offered the opportunity to apply over the phone, at their local branch, or online.

Things to Consider Before Renewing

You may want to consider your options before you decide what to do. There are online calculators to help you determine whether it is possible to pay off your loan faster. What you do is enter information such as your payment frequency, amortization, interest rate, and type of mortgage and repayment schedule, as well as loan amount. You can choose from different mortgage types such as 5-year variable closed, 10-year fixed closed, 3-year fixed closed, and others. Then you should enter the amortization period, e.g. 10, 15, 25 years, and so on. Finally, enter any extra payments you have made, including annual and one-time prepayments.