What should you do when your mortgage is up for renewal?

What you’ll learn:

• How to get more favourable terms and a lower interest rate
• When to change your mortgage type to save money
• How to switch to QuestMortgage to get BetterRate ^®

An envelope arrives in your mailbox or you receive a lengthy email from your mortgage provider. Your mortgage renewal documents are in. What do you do?

Your first thought might be to just sign the papers and call it a day. But if you do, you might be losing out on thousands of dollars over the long term. If your goal is to save money for the future, it might be time to review your current deal.

You may have a few questions. Should you try to renegotiate your terms? Switch mortgage providers? Stick with the same type of mortgage? The point is, you have options and you’re in the driver’s seat. So before you return the offer sheet without giving it a second thought, let’s evaluate your options together.

Below is what you may need to know about making the mortgage switch or moving your mortgage to another bank.

Why you should switch mortgage providers

When your mortgage is up for renewal, it’s an opportunity to save money. The end of your term is the best time to shop around because it’s the only time it costs less to switch if you have a closed mortgage. There may, however, be legal costs when switching your mortgage, such as an appraisal fee or legal fees. So now’s the time to seek out options that can better suit you and your family’s needs.

Switching to get a lower interest rate

Your interest rate is one of the most important things to look for when deciding whether to switch, as a lower interest rate can save you thousands over the term of your mortgage. Even what looks like a small difference in percentage points could lead to massive savings over your next mortgage term. Let’s look at an example where your mortgage is coming up for renewal after 5 years, with $450,000 and an amortization period of 20 years left. Please note these figures are for illustrative purposes only.

So, you would save $50/month by switching mortgage providers. This by itself may already be worth switching for, but see what this $50 can turn into after 5 years.

You could save $3,000 over the 5 year term of your mortgage simply by switching from a 2.45% to 2.22%.

Switching to get more favourable terms

A lower mortgage rate is one way you can save. But switching to a mortgage with more favourable terms and conditions can also help you keep more of your money.

When evaluating different mortgage options, look into the provider’s prepayment privilege (where you can make ad-hoc lump sum payments to your mortgage anytime throughout the year, in addition to your regular payments). Also, keep an eye out for payment increase options (where you can increase your regularly scheduled mortgage payments anytime, up to 100% of the original of the original monthly payment).

Choosing a provider with better prepayment options can help you save on interest and ultimately help you be mortgage-free sooner. For example, with QuestMortgage, you can enjoy some of the best prepayment privileges on the market, of up to 20% of the balance at the start of the term, per year. Our payment increase option also allows you to increase your mortgage payments at any time (up to 100% of the original payment amount) so you can pay off your mortgage faster.

Let’s take a look at how much even a 20% increase to your mortgage payments can save you. Say you have a $450,000 property and you get a mortgage rate of 2.22%, and you have an amortization period of 20 years. Your monthly mortgage payment would be $2,321. With a 20% prepayment privilege, add 20% of your monthly mortgage payment ($2,321 x 20% =$464) on top of your regular payment. So, your total monthly payment would be $2,785.

Over the 20-year amortization period, you would save $22,541 in interest.

You could also pay off your mortgage four years earlier than if you had the same mortgage without the prepayment privilege, which could shorten your amortization period. Just keep in mind the privilege alone doesn’t help pay off the mortgage faster or save money, as you’ll need to exercise the privilege.

Other conditions may also be important to you, like the length of your term. But these depend on your personal preferences, so be sure you take the time to review and evaluate your options.

What about changing my type of mortgage?

If your mortgage term is up, you may also be considering changing the type of mortgage you have. If you find yourself in an increasing-rate environment, it might make sense to switch from a variable-rate mortgage to a fixed-rate option.

With a variable-rate mortgage, your payments and interest rate will fluctuate based on a prime rate. A variable-rate mortgage is attractive if rates decline, which may help you save over the term of your mortgage. However, if the prime rate increases, so will your rate and payments. If the prime rate is something that keeps you up at night, then it might be better to switch to a fixed-rate mortgage. See our mortgages to help you find the one that best suits your needs.

Switching to QuestMortgage

QuestMortgage is the easy, online way to get a mortgage. Our mortgages offer greater flexibility than the banks and can help you save thousands over the life of your mortgage. You can apply online and access your mortgage any time you’d like with full transparency.

Have questions about QuestMortgage? If your mortgage is up for renewal within the next 120 days, we can start the application and set the closing date for 120 days or less to match your current maturity date. Then, we’ll complete the switch on that day. Plus, we have a team of dedicated Mortgage Advisors available if you need them to help walk you through the process.

Get started today to see what rate you could get.

The information in this blog is for information purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied is made by Questrade Group of Companies, its affiliates or any other person to its accuracy.