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.
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.
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