When it's time for mortgage renewal, many homeowners simply sign the renewal offer from their current lender without considering their options. If you’ve been consistent with your mortgage payments all this time, you can negotiate better terms and even a lower interest rate! Whether it's seeking a lower interest rate, adjusting the payment schedule, or finding more flexible terms, understanding how to approach your lender makes all the difference.
Here are 7 tips for negotiating better terms at mortgage renewal:
1. Start Early and Research
The early bird gets the worm, or in this case, potentially better mortgage terms. Don't wait for your lender's renewal notice, which they typically send 3 or 6 months before your renewal date. Start researching rates a few months in advance and look deeply into the terms and conditions of lenders you like. Talk to friends and family who recently purchased or renewed their mortgage to gather a general idea of the current market trends in your country.
2. Loyalty Isn't Always Rewarded
It might sound counterintuitive, but your current lender might not always offer you the best deal upfront. When you first get a mortgage, you might not have received the best terms as a first time buyer with just 5% as down payment. Now that you have more equity in the property, you can shop around. They're banking on you not wanting to go through the hassle of switching. Shop around, get quotes from other lenders, and use them as leverage.
3. Understand All the Terms
Interest rates are crucial, but they're not the only factor. Consider prepayment options, penalties, and flexibility. Some lenders offer the flexibility to make lump sum payments or increase your regular payments, up to a certain percentage, without extra charges. Sometimes a slightly higher rate with better terms can save you more in the long run.
4. Improve Your Credit Score
In the months leading up to your renewal, pay down debts, ensure all bills are paid on time, and avoid taking on new large debts. Get a detailed copy of your credit score from Credit Union or Equifax and look for any wrong penalties. Then request the responsible vendor or your bank to investigate, which will help increase your credit score. Lastly, limit the number of new credit applications. Each application can result in a hard inquiry, which can temporarily lower your credit score. Only apply for new credit when necessary.
5. Consider a Mortgage Broker
Mortgage brokers have access to a variety of lenders and can often secure rates and terms that might not be available to the general public. Plus, their services are typically free for homeowners as they're paid by the lenders. If you’re in Kingston, Ontario, Leo Ragusa is a well-reviewed and experienced mortgage broker who specialises in mortgage renewals.
6. Be Ready to Walk Away
If negotiations aren't going in your favour, be prepared to switch lenders. Yes, it might involve some paperwork and penalties, but the savings over the years can be well worth the effort.
7. Ask and You Might Receive
Sometimes, it's as simple as asking. If you've found better terms elsewhere, present them to your current lender and see if they can match or better the offer. The worst they can say is no, and you're no worse off than before.
Your home is one of your biggest investments; make sure the financial terms surrounding it are working in your favour. For mortgage advice and tips, follow Mortgages Kingston.