Renewing Into an Open at Maturity

mortgage-renewal Each year hundreds of thousand of Canadians renew their mortgage by signing the renewal form their lender mails out.  They don’t shop around. They just trust their lender.

Obviously, this can be a terrible waste of money.  CAAMP says people seek just 1.85 quotes on average before renewing.  How are you ever supposed to get the best deal that way?

A big reason people resort to signing their renewal forms is procrastination.  They do no homework, or don’t use a mortgage planner, and then find themselves 1-2 weeks from renewal in a panic.  The easiest fix they figure is to stay with their current lender.

What a lot of people don’t know, is that you can often ask your lender to renew you into an open mortgage temporarily.  The rate may be higher than your permanent rate (e.g.  7-8%) , but you only need it for a few weeks while you arrange alternate financing.

It’s a move that costs very little but it buys you more time to find the best terms in the market.

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Update:  As one of our readers correctly pointed out, some lenders don’t have open mortgages for you to renew into. So you have to be careful.

PC Financial for example will roll you into a 6-month convertible automatically if you don’t renew on time.  ING will automatically renew you into a mortgage of the same term.  If that happens and you want to break these mortgages to go elsewhere, a penalty will usually apply.

The moral, try to renew well in advance, and if you can’t, make sure your lender has an open mortgage that you can renew into in the meantime.  Most of the big banks have them.

  1. How do you tell if the person shopped around or not? You don’t have to get physical quotes to shop around, you just have to visit a few rate listing web sites and find out if your rate is ‘worth the hassle’ or not.

  2. CAAMP is known for pulling stats out of the air–they have know way of knowing how much rate shopping people do or do not do, just like in a previous article they have no way of knowing what average LTV’s are for the industry.

  3. Traciatim,
    You can view rate listing sites and base your decision on which financial insitution to go with, however most banks only advertise posted rates and depending on your financial sisutation, when you go to speak to a representative in person they can provide you with more discretion. Bringing over your relationship from another FI also helps substantially.
    You never know what rate a bank is willing to give you until you present your situation to them, with exception of institutions such as ING that post the lowest rate they are willing to give with no negotiation.
    It can take some time but the benefits will be well worth it as some banks not only offer a lower rate and other perks like free banking for years which really adds up.

  4. Exactly,
    As Dynamite notes, CAAMP performs surveys to obtain this data. The surveys are done by Maritz, a very well-known research firm.
    Their data is among the best we have due to their sampling methods and the breadth of data they compile.
    Cheers,
    Rob

  5. What if you find yourself in a “tight” financial situation (e.g.: recently lost job, or income stream uncertain because you are self employed) when you’re up for renewal? Is there still room to negotiate? Is it even possible to change lenders?

  6. worth noting that most “discount lenders” (ie ING, President’s Choice, etc…) don’t offer open mortgages on maturity

  7. Chris,
    If this is the same Chris that has posted similar questions in other threads. Then, if you lost your job or income stream is uncertain,etc–when your up for renewal–you would really only be able to negotiate with your current lender (again assuming they are still in business) as they know your payment history, if you try and move your mortgage elsewhere then they would do a NEW application–credit history, job confirmation, etc and if you have lost your job, etc you would probably not qualify.

  8. Hi Whistler,
    Thanks for that very good point. Sometimes something is so obvious to us that we forget it might not be so obvious to others. That is the great benefit of reader comments.
    Thanks again

  9. what about legal fee and stuff, if you renew with the same bank, no renewal fee, but if you change your bank then you have to pay renewal fee.

  10. Legal fees/Discharge fees incurred when transferring from one institution to another are usually negotiable–i.e. get the new lender to eat the cost or the mortgage broker/planner to pay for it for you–they are being paid a finder fee–let them cover some of the costs, if you are doing yourself with no broker/planner then still ask the new lender to eat the cost for getting the business.

  11. >>>You never know what rate a bank is willing to give you until you present your situation to them, with exception of institutions such as ING that post the lowest rate they are willing to give with no negotiation.
    Which is precisely why the first comment by Traciatim is relevant.
    You can go to a newspaper or numerous internet websites for “posted” rates — so your bank (say CIBC) has a posted rate of 6% and you look down the newspaper chart with the posted rate for ING/President’s Choice/Canadian Tire (at say 4.8%).
    You call your CIBC branch and they give you 4.75% — you know it’s a pretty good rate because it’s even lower than the low cost/non-bank/non-negotiable mortgage rates by INC or President’s Choice or Canadian Tire.

  12. Calling your bank to get a renewal quote is fine but I don’t think you will get the best deal that way. From my experience you have to shop a lot of banks to get the best rate. The problem is that it takes time and is kind of a hassle. It also seems that banks know nothing about the competition’s mortgages so its very hard to compare mortgages this way. Instead of jumping through these hoops we got our last two mortgages through a mortgage agent and have been happy with the result. We got the best deals at the time and he guided us through the entire process.

  13. >>>Calling your bank to get a renewal quote is fine but I don’t think you will get the best deal that way.
    Of course, you are right.
    But I am saying that ING/Canadian Tire/President’s Choice is playing the “rabbit” (i.e. greyhound races) with their posted rates.
    Without the “rabbit”, all the “posted” mortgage rates are USELESS because they are all in 6-7% range. But with the “rabbit”, your newspaper’s posted mortgage rate chart is not as “useless” as before.
    With the “rabbit”, the number of “quotes” you need to get — should go down in absolute terms.

  14. The banks make the majority of their profit from renewals. There is not that much to be gained from the initial term because it takes so much money to get a new mortgage customer.
    If you do try to move your mortgage, then your current bank will fight extremely hard to keep your business. They will almost undercut any rate.
    The best strategy to get a better rate is to shop and bring your results to your lender, mortgage retentions especially.

  15. My experience was the opposite. I took RBC’s best rate and brought it to my broker. He beat it by .25 percent as I recall.

  16. Hi
    my mortgage is coming up for renewal and my present lender is offering me a compatative rate but at the moment i dont have a job i had been paying for last year my payment on time, am i going to get new mortgage without any job confirmation from my current lender?

  17. I’ve renewed in the past with the same institution and wasn’t been asked about confirming job status.

  18. My mistake. If you’re renewing with the same lender, they won’t ask any questions. For some reason I thought you were switching lenders.

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