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 The
Money Management Newsletter: Home
Ownership
Don't let your mortgage automatically renew
By John-Andrew Newman, AMP, RDB
Fiscal Agents Mortgage Services (with files from NC)
A Money Management Newsletter article
When's the last time you thought about your mortgage?
Do you know your rate? Do you know when your term is up for renewal? Do you
know what happens if you don't renew your mortgage? Many Canadians don't. It's
no wonder when it comes time to renew a mortgage, many people fall into the
auto renewal trap.
An Angus Reid survey, commissioned by ING Direct found that more than a quarter
(27%) of Canadians with mortgages that have come up for renewal allowed their
mortgages to automatically renew – meaning they didn't perform the same
due diligence upon renewal as they did when they first got their mortgage. Letting
your mortgage automatically renew often means you missed an opportunity to save
money.
The same survey found that 40% of Canadians waited until 30 days or less before
their closing date when they first applied or got pre-approved for their mortgage.
Exhibiting the same behavior at renewal time leaves little time to exercise
your options. Most big banks send out mortgage renewal letters around 30 days
before you need to make a decision, which doesn't leave much time to negotiate
or shop around for a better rate.
Canada's big banks also typically offer their posted rates to clients upon
renewal. Their posted rates are about one per cent higher than what the average
Canadian normally gets. On an average $200,000 mortgage with a five year fixed
term, amortized over 25 years, a one per cent difference could save you roughly
$10,000 in interest over that period (calculated using average current five
year fixed rates of 4.24% verses 5.24%).
How to avoid the traps
• Know your options and exercise them. Remember that you are in control
of your mortgage at renewal time, not your lender. It's your opportunity to
make changes to your mortgage that will save you the most money over the long
term.
• Don't wait until the mortgage renewal letter arrives in your mailbox.
Pay attention to your mortgage term and when it's coming up for renewal. You
can usually check your renewal date online.
• Start shopping around for rates at least 120 days before your mortgage
comes up for renewal. Rate guarantees, offered by most banks, mean you will
get the bank's lowest rate for a set period of time, usually 90 to 120 days,
and if the rates go down during that period, you automatically still get the
best rate.
Knowing and avoiding these traps will help you take control of your mortgage
and save your money.
More - Mortgage related tools
• Looking
for the perfect Mortgage - The Learning Centre
• Check
current mortgage rates
• Straight talk mortgage tips
• Quick
mortgage calculator
• On
line mortgage application
• Mortgage
amortization calculator
• Qualifying
for a mortgage worksheet
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©
, Fiscal Agents Money Management Newsletter
25 Lakeshore Road, Oakville, On L6J 5B4.
(905) 844-7700
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