It’s important when it comes time to renewing your mortgage that you don’t simply sign and return your bank’s renewal letter that they send you in the mail. They are counting on you to not do any research and simply accept whatever rate they offer. This is a mistake as the majority of the time those rates are not anywhere near today’s best rates. Some helpful tips when it comes to renewal:
1) You can hold a rate for up to 90 days so it’s always a good idea to start the process sooner than later. That way if rates do go up, you have a good rate locked in.
2) At renewal you can also switch your amortization, pick a new term, pick new payment dates, change payment frequency and decide rather you want to go variable or fixed.
3) Switching lenders doesn’t cost you any money.
4) You will need to re-qualify when switching lenders. This means we will need to pull your credit and collect the same documents as when you originally purchased.
5) When switching lenders your amortization will remain the same.
Here is an example of a letter a client got in the mail at renewal. The best 5 year term fixed rate they offered the client was 4.99%. If we take this rate and compare it to what the majority of lenders are offering today at 2.89% and look at the difference in interest charges you will see why it’s important to shop around.
Mortgage is $250,000 based on a 25 year amortization.
Example 1: 5 year closed term at 4.99% your monthly payment will be $1,452.59 and you will pay $58,389.35 in interest charges over those five years.
Example 2: 5 year closed term at 2.89% your monthly payment will be $1,169.05 (savings of $283.54 monthly) and you will pay $33,375.94 in interest charges (savings of $25,013.41) over those five years.