What most people will do when it comes to renewing their mortgage is simply sign the renewal documents and send them back to their bank, without so much as doing a Google search to see if what they are being quoted is accurate. While this might be unbelievable to some, this is how many people treat their renewal. The banks know this, so it’s not uncommon for them to offer you rates that are higher than market rates. That is, higher than rates that are given to new customers walking in off the street. I’ve even seen some banks offer posted rates, which are rates significantly higher than what they would offer you if you were a new customer.
Let’s say you owe $500,000 on your mortgage, and your mortgage lender offers you a 5 year fixed at 3.64% at renewal. Not crazy, as this is the going market rate for a 5 year fixed right now. However, there are rates available outside the banks as low as 3.14%* right now. This represents a difference of a whopping $12,166.14 over the 5 year term! (assuming 20 year remaining amortization). In other words, anyone who just signed and sent their renewal documents back to the bank just missed out on $12,000 in savings.
Is it any wonder why the big banks have the largest buildings in every city!
We all get caught up in our busy lives, and it can be very tempting follow the path of least resistance by signing your mortgage renewal documents and be finished with it. It requires close to zero effort on your part. Just be aware on what this shortcut can cost you in terms of your hard-earned money. How long would it take for you to earn $12,000 in after tax dollars at your job?
Switching a mortgage really doesn’t take that much effort. For employed applicants, the typical documents required are as follows:
- Job letter showing your position, start date and annual income
- Recent pay stub
- Copy of existing mortgage statement
- Property tax bill
- Home insurance policy
- 2 pieces of ID
In lieu of a job letter and pay stub, self-employed borrowers would just need to provide their last two years Notice of Assessments (NOAs) and T1 Generals (Tax returns), along with articles of incorporation or business license (if available).
Would you be willing to collect those documents if someone offered you $12,000 to do so?
To find out how much you will save when your mortgage comes up for renewal, shoot me an email or give me a call! The process can begin once you are within 90 days from your maturity date and typically takes about 30 days to complete from beginning to end.
*Rate is available with 35% equity in your home, with a property value under $1 million (value doesn’t matter if your home was purchased prior to November 30th, 2016).