If your mortgage renewal is approaching and you are unsatisfied with your current renewal offer, Robert McLister, mortgage industry expert, advises that there has never been a better time to switch lenders. "Record renewal volumes and weak home sales are keeping lenders hungry, discounts are historically strong, flexibility is more important than ever, and the menu of mortgage options has never been larger," says McLister.
Here are the primary reasons to consider switching:
Aggressive Rates: Residential loan growth is currently 31 per cent below the 20-year average, forcing lenders to compete fiercely. Even a minor 0.1 per cent rate reduction can save approximately $466 over five years for every $100,000 owed on a 20-year mortgage.
Generous Cash Back: Many banks are offering significant cash incentives to attract new business, with average-sized mortgages often qualifying for rebates of $2,000 or more.
Easier Transfers: Federal regulators now allow mortgage transfers between lenders without requiring borrowers to re-take the mortgage stress test.
Increased Flexibility: Switching can provide better "porting" rules if you plan to move, or more generous prepayment privileges to help avoid high early-termination fees if you need to sell or refinance.
Strategic Locking: If you currently have a variable-rate mortgage, switching can offer better conversion rates when locking into a fixed-rate term.
It is advisable to secure a favourable rate well in advance of your renewal date; while some lenders only hold switch rates for a month or two, others offer extensions of up to 4 months. As appealing as cash rebates sound, factor them into the total package, not as the sole reason to switch lenders. Have the lender or broker calculate the total dollar cost of switching, including projected interest expense, fees, rebates and potential future penalties.
Finally, negotiate with your new lender to cover the discharge or assignment fees charged by your current institution.