Most people don’t find mortgages to be very thrilling, however the inner nerd in me definitely does, and mortgage renewals in particular are very exciting to evaluate! ? Believe it or not, there is an incredible amount of savings protentional at mortgage renewal time, so read on to learn all you need to know!
At some point before their maturity date borrowers will receive a renewal offer from their current lending institution, but should be very prudent in regards to simply signing on the dotted line. You see, 80% of homeowners will automatically sign their renewal offer without much consideration, and because the lenders know that, they will often offer rates that are higher than what is currently being offered in the market.
If you’ve been quick to sign in the past, that’s completely understandable, after all, it’s not your job to be following mortgage rates!! I’m sure you’ve trusted that your lender had your best interest at heart, and was being fair with you at renewal, but unfortunately that isn’t always the case. ? But, when you know better, you do better, right?!
This is how I like to handle upcoming mortgage renewals for my clients:
- Existing clients will hear from me about 5 months prior to their maturity date to start prepping for the process, and to let them know what to expect. At this point in time I will typically encourage them to update their mortgage application, including sending me updated documents in an effort to requalify them for their renewal.If you’re not an existing client, that’s ok too – reach out to me around this 5 month mark and I will prep you just the same, or email me with your renewal date, and I’ll track it for you!
- If the clients requalify, that opens up the doors to shop the market in order to get the best rate and product available.DISCLAIMER: Don’t fret if for whatever reason you don’t requalify, because as long as mortgage is in good repayment, you will more than likely receive the renewal notice from your existing lender, as mentioned above.
- Once we have the qualification in place, and once we are within 120 days of the maturity date, my advice would be to submit the application to a lender for a rate hold.This will protect the client from any rate increases up to the maturity date, and of course if the rates drop we would be able to lock in the lower rate. Consider the rate hold, and the time and effort put into getting to that stage, as an insurance policy to protect against rising rates, or in the event the existing lender doesn’t offer a competitive rate.
- About 4 weeks prior to the maturity date, we will re-evaluate all options, including the rate hold and the current lender’s offer, and finalize the best option for the next mortgage term.
Many people often ask if there is a cost to switch lenders at the time of renewal, and although there are unusual circumstances where the answer would be yes, typically there is NO cost. Having said that, sometimes the existing lender will charge a transfer fee, but that is never out of pocket, and will either be wrapped into the new mortgage, or in some cases even absorbed by the new lender!
Lastly, borrowers are also required to meet with a Title Company as the final step to the renewal process when we are switching lenders, and this is simply to ensure the title is properly switched over. This company will meet in the borrower’s home, at a time that is convenient for them, and it will only take about an hour of time.
Of course our clients best interest is what we always keep at heart, and if the current lenders offer is the best fit, we will be the first to say so!
I would be honored to help you navigate your next mortgage renewal.