There is a tremendous amount of competition and money available at present in the mortgage lending market. Lenders want your business, and will offer you many incentives to entice you, especially if you are willing to transfer your existing mortgage financing. For example, some lenders are willing to absorb your legal, appraisal and/or transfer fees, up to a certain limit.
When your mortgage term expires, the full amount of the outstanding mortgage principal, as well as any accrued interest, is deemed to be immediately due and payable. Various options will be open to you, including renewal for a further term with the same lender or refinancing with a different lender. By having a better understanding of the process, you can make the right strategic decisions for your needs, and negotiate the best deal.
Here are the key strategies to consider:
refer to weekly mortgage interest tables in your local paper as a starting point for comparison.
compare and contrast the features and benefits of a minimum of three competitive offerings. The interest rate is only one factor. Other factors include: fixed or variable rate, open or closed mortgages, penalties or portability (i.e., the ability to transfer your existing mortgage to another property when you sell your home). Make sure you fully understand the implications of the mortgage features that you select.
if you are arranging for an accelerated mortgage, ask the lender to provide you with a chart so that you can see how quickly the extra payments (weekly payments, for example) will speed up the payment of the mortgage. Some “quick pay” types of mortgages are paid out faster than others, depending on how the lender calculates the reduction of principal, and the amount of your payment.
consider the benefits of using a “no-fee” mortgage broker. You don’t pay a commission if they arrange financing for you. Look in the Yellow Pages.
attempt to negotiate a better deal than the official rate. Many lenders have the discretion to offer you a lower rate to get or keep your business, based on various factors. Success in renegotiating a deal can depend on your “leverage”, your negotiating skills, and on how much the lender wants your business. For example, if you have been a customer for a long period of time and use other services offered by the lender such as bank accounts (personal and business), loans, or RRSPs, the lender may be more willing to budge on the rate.
if you are a new customer and would be prepared to use other services, that is also a factor. Depending on the banker and the circumstances, you might be able to negotiate a reduced interest rate of one-half per cent or more.
If you decide to accept the renewal from your current lender, select the term, interest rate and payment frequency from the options set out by the lender. If the interest rate you select drops or increases between the date of signing and the actual renewal date, the lower rate shall prevail. Make sure that the rate is in writing, along with any other features you want modified, such as the amortization period, interest rate, obtaining more funds or waiving of certain charges.
Overall, remember to determine your needs, understand your options and their implications and comparison shop.
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