MORTGAGE RENEWALS WITH THE SAME LENDER ARE ON THE RISE, BUT SHOULD YOU JUST SIGN ON THE DOTTED LINE
2019-10-15 | 10:14:52
Welcome to the October issue of your monthly home & mortgage news offering tips to keep you in the know! Please feel free to contact me with questions or feedback regarding this issue. Thanks again for your continued support and referrals.
MORTGAGE RENEWALS WITH THE SAME LENDER ARE ON THE RISE, BUT SHOULD YOU JUST SIGN ON THE DOTTED LINE _______________________________________ MORTGAGE LINGO DEFINED _______________________________________ IMPROVING YOUR CREDIT SCORE ISN’T AS HARD AS YOU THINK _______________________________________ DID YOU KNOW...
MORTGAGE RENEWALS WITH THE SAME LENDER ARE ON THE RISE, BUT SHOULD YOU JUST SIGN ON THE DOTTED LINE? Your mortgage broker has answers
If you're in a mortgage that’s coming up for renewal in the coming months and you’re considering just staying with your current lender, you wouldn’t be alone.
According to the Canadian Mortgage and Housing Corporation’s (CMHC) Residential Mortgage Industry Report released in the summer, in 2018, the number of mortgage renewals with the same lender increased by 16 per cent over the previous year.
The report suggested one of the factors that may have contributed to large increases in loan renewals with the same institution is the tighter approval criteria. In other words, people are worried they may not qualify for a new mortgage if they switch lenders, so they're staying put.
You’ll remember in the fall of 2017, OSFI, (the Office of Superintendent of Financial Institutions) the agency that regulates the financial industry, announced tighter rules on mortgages. The biggest change is related to uninsured mortgages (homebuyers with 20 per cent or more for a down payment). These homebuyers are now required to go through a "stress test". The changes came a year after a similar stress test was introduced for insured mortgages.
If the tighter mortgage rules still have you stressed as you face a mortgage renewal, the CMHC report noted the approval rate for same lender renewals remained stable at 99 per cent. Renewals are not specifically subject to the new stress test and are more likely to meet current lender criteria, the reported noted.
So, does that mean you should just automatically renew your mortgage with the same lender when your term is up? Not necessarily. You need to reach out to a mortgage professional to get the best advice.
For starters, most lenders will send you a renewal letter when there's between three and six months left on the term. Typically, the lender will offer you a rate at that time and all you’ll have to do is sign at the bottom line to roll over your mortgage.
But beware, lenders often offer a higher rate than for a new client because they're hoping the ease of renewal will keep you from seeking out a new lender and lower rate.
Ask yourself "Is it worth the time and effort to save a few basis points off your rate, or a few hundred dollars over a term to make the switch?"
For some, it won’t be. If a switch can lead to saving thousands of dollars it would certainly be something to consider. While everyone’s situation is different, the larger the mortgage, the bigger the savings will be when you find a lower rate.
Often, homeowners will just use the bank their parents recommend for their first mortgage. But they might find themselves not happy with the service or terms of the mortgage and may just want to switch to a different lender as the mortgage comes up for renewal.
If that's a situation you find yourself in, you have options, and a mortgage broker can help you make the best decision.
Getting a mortgage can be a daunting task. There is so much to know and understand including some pretty confusing language. Borrowers are often confused by mortgage terminology, so in an effort to keep you educated we welcome you to the monthly edition of Mortgage LINGO defined.
Mortgage Default Insurance
This is required for mortgage loans with less than 20% down. Default insurance protects the lender in case you are unable to fulfill your financial obligations on your mortgage. Have questions? Contact me today to find out more!
IMPROVING YOUR CREDIT SCORE ISN’T AS HARD AS YOU THINK
If you're credit challenged but want to get into the housing market, it can be a tough road to haul. But improving your credit to a point where a lender will give you chance, is very doable.
I won’t bother you with the details of how credit scores are calculated. What you need to know is a score above 680 puts you in a good position to get financing, while below will make it tough and improvement is needed.
Your credit score gives lenders a basic overview about your credit: How long you’ve had credit, your ability to pay back that credit and how much you owe. And so your credit score is affected by how much debt you’re carrying in regards to limit, how many cards or tradelines you have and your history of repayment.
If you're a young person and new to the world of credit, consider the 2-2-2 rule to help build up your credit. Lenders want to see two forms or revolving credit, like credit cards, with limits no less than $2,000 and a clean history of payment for two years. It’s also good to note that a great credit score will also include keeping a balance on all those cards below 30 per cent of the limit.
To ensure your score stays ship-shape, make sure to pay off any collections like parking tickets, and correct any old or incorrect reporting on your credit file by contacting Equifax to have it removed. Some people also forget their credit cards have an annual fee and fail to pay them off too.
I cannot stress this enough; if you want to keep or attain a good credit score, you have to pay your credit cards or tradelines on time regardless of whether you owe $1 or $1 million.
There is a tendency when things get really bad to consider declaring bankruptcy or a consumer proposal. A consumer proposal is a formal, legally binding process to pay creditors a percentage of what is owed to them. You really want to avoid these two options. Instead, there are companies out there that will perform the same function and negotiate your debts, but it won't impact your credit or carry the stigma of bankruptcy or a consumer proposal.
Lastly, if you already own a home and have some equity, but you're still drowning in credit debt, consider refinancing your mortgage. Sure, you might not get the great rate you have now or you might get dinged for breaking your mortgage early, but using the equity in your home to get rid of high interest credit payments could keep more money in your pocket at the end of the day.
DID YOU KNOW...
When you’re buying your first house, negotiating for the mortgage can seem like the least fun and most complicated part of the process. But having no experience making one of life’s biggest purchases doesn’t mean you’re destined to pay the bank’s listed rate. I will work on your behalf with multiple lenders to ensure you receive the best mortgage product and rate catered to your unique needs - whether it’s your first or fifth mortgage.