If your mortgage is coming up for renewal, you should shop around for the best deal, reports Rob McLister from Canadian Mortgage Trends. Most borrowers don't.
In fact a survey by Martiz/CAAMP revealed that only 56 per cent of borrowers negotiated their rates when they came to renew. So almost half of all Canadian mortgage borrowers are not getting the best deal because they don't comparison shop!
Lenders make money when you renew your mortgage with them. If you renew with the same lender, they don't have to compensate anyone for referring you. And if you don't negotiate, you won't be offered the best deal.
You expect to negotiate if you're choosing a new lender. But you should negotiate even if you're staying with the same lender. As the Bank of Canada discovered, you could be paying almost double the rate markups than savvy comparison shoppers pay.
But bank customers are often loyal. The Maritz/CAAMP survey found that 4 in 10 mortgage renewers accepted the first rate their bank offered. They trusted their lenders to give them the best rate at renewal time. This trust is misplaced.
The lenders are aware of this. Comparison shoppers who are prepared to negotiate, armed with competing offers, should then be offered better offers from their original lender. The lender doesn't want to lose your custom, so their rates will become more competitive.
So if you're well qualified, what should you do to ensure you get the best deal?
Shopping around is your best bet. Call the non broker banks, such as RBC, and BMO. And consult mortgage brokers, credit unions, and other banks to shop around for the best rate. You should be able to negotiate a one- or even two-tenths of a percentage point off your rate.
Compare rates. Check the main rate comparison websites. Get second, even third opinions.
Consulting brokers should be a part of your mortgage renewal plan. But according to Maritz, only 28 per cent of borrowers "definitely" plan to consult a mortgage broker at renewal time. This means over 70 per cent of mortgage customers might not be getting their best deal.
Some unethical mortgage brokers have tainted the whole industry. A minority of these brokers convince borrowers to switch to their firms not to save the borrower money, but solely to get a commission. Some research should enable you to identify and avoid these firms.
Most mortgage brokers are highly ethical. Again, check up on them. Research, before accepting an offer. They may be able to offer you better offers, or may have rate promotions or mortgage features which will save you thousands of dollars in interest.
But make sure you pick the best overall deal, not just the lowest rate. Read the fine print! A low deal could contain restrictions, such as minimum amortizations. Make sure you know what you're signing.
Your mortgage is one of the most important financial decisions you'll make, so it makes sense to research and to find the best possible deal.