- With so much risk and opportunity
in the mortgage market right now,
it's never been more important
to get your mortgage renewal right.
So today we're talking about
how to renew your mortgage in 2020.
We've got seven rules to make sure
you get your mortgage renewal, right,
including one that will save you
tens of thousands of dollars.
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Okay, so let's get into it.
2020 is going to go down
as the most volatile mortgage market in history.
In a very short 23 day period,
we saw the Bank of Canada lower interest rates by 1 1/2%,
While at the same time, five year fixed rates increased,
when they should have been going down.
The reason for this, purely risk in the marketplace.
And quite frankly, we expect interest rates to continue
to be volatile for the next two to three years,
meaning there's going to be big swings up,
and big swings down.
Which is why when our mortgages
are coming up for renewal and 2020,
we need to make sure that we're both protected
from interest rates that are on the rise,
as well as give ourselves the opportunity
to take advantage of lower interest rates
as they become available.
So it's never been more important
to get this renewal thing, right,
which is why we've put together seven rules
to renewing your mortgage in 2020.
So let's start with the first rule.
We want you to start shopping for your renewal rate,
six to nine months before your mortgage
actually comes up for renewal.
Now, this might seem counterintuitive,
because rate holds only lasts for four months.
However, if you've got to rate hold,
six to nine months in advance,
and interest rates start to rise,
then you've got the power to make the choice
of paying your payroll penalty and taking a lower rate,
or waiting it out until your actual renewal date
and potentially paying a higher rate.
Being prepared and being in the driver's seat in this matter
can literally save you thousands of dollars
over the next five years.
So start looking for that renewal and rate holds,
six to nine months in advance.
It's also important to note that nine times out of 10,
the lender that you have currently in May
not be the right lender for you going forward.
Five years is a really long time
and there's a really good chance that the mortgage
that was right for you five years ago,
isn't going to be the mortgage that's right for you today.
So you want to make sure you have your options open
and you're shopping other lenders.
Rule number two is don't automatically renew
with your existing lender.
This goes to our point of making sure
you're shopping around.
With the uncertainty going forward,
there's one thing that you need to keep in mind
and that's that your mortgage needs to be flexible.
Flexibility is the single most important factor
in a mortgage going forward in 2020.
And in all likelihood that means
you probably don't want to mortgage with a big bank.
Big banks are big immovable objects
that aren't known for their flexibility.
If interest rates start to go down in the future,
like a expect they will, you're gonna want to make sure
that you have a mortgage that's transferable
to a different lender for a lower rate.
This means making sure your mortgage
is both transferable and has a little pale penalty.
We'll discuss this further in a moment.
Rule number three is to make sure
you consult a mortgage broker.
If you aren't doing this, you're crazy.
But when you consult mortgage brokers,
you want to make sure that
they aren't discount mortgage brokers.
Now how are you going to be able to tell the difference
between a discount mortgage broker
and a full service mortgage broker
that does mortgage planning?
Well, the discount mortgage broker isn't going to tell you
that they're a discount broker.
But there's a few dead giveaways.
The first is if they only address interest rate,
or they primarily address interest rate.
If interest rate is their primary concern,
there's a good chance they're discount mortgage broker.
A mortgage broker that does mortgage planning
is probably going to ask you more questions
about what your plans are for the property,
what your plans are for the future,
and ask you more questions about your general finances
to make sure that the product that they offer
is the right fit.
Again, with all the uncertainty in the market going forward,
you want to make sure that you have a planner
who's going to make sure
that you have options going forward.
Always go with a planner, not a discount broker.
Rule number four is to assess if there's any other changes
you need to make your mortgage at this time.
You perhaps need to pay off some debt
or do some other financial planning.
Perhaps you want to do a renovation,
build a garage, or do a basement development.
Now is the time to assess whether you want to do that
in the next five years.
And if you do set it up now so that you can do it cheaper
than if you were to go back and refinance later,
and have to pay a penalty.
Rule number five is make sure your mortgage
doesn't have any of the following restrictions.
You want to make sure your mortgage
doesn't have a no refinance or no transfer clause.
This can prevent you from being able
to switch to a different lender for a lower rate.
You'll also want to make sure
that if you're getting a five year fixed
at the pale penalty calculation,
doesn't include a discount in the calculation.
So this is pretty much true for any big bank.
They're going to have a discount
that is used in the calculation of your mortgage.
That discount isn't because they gave you a better rate,
than what was the going rate at the time,
it's just simply the discount off a prime,
and that discount is used to inflate your penalty.
So make sure that when you look at the penalty calculations,
that discount is not included in that penalty calculation.
That's the difference between you,
paying 10 to $15,000 more on your penalty,
and that is the one tip of everything
that we're going to give you here today,
that could potentially save you,
tens of thousands of dollars in the long run.
You also want to make sure you avoid mortgages
with flat fee penalties.
So one, two, 3% penalties.
These can end up being costly as well.
And at this point in time,
we're recommending that you stick to Canadian lenders.
Back in 2008, 2009 when the last financial crisis happened,
we saw many of the big international banks leave Canada.
Not because things were going wrong in Canada
but because the Canadian operations were profitable,
and they were able to sell them off,
or simply leave And take the profits back home
to where they came from.
This is a huge concern during this pandemic,
as I suspect there will be a few international lenders
that decide to right-size their businesses
and return back to the countries where they originated.
Rule number six is don't chase rate, chase the product.
It's never been more important than right now
to make sure that the mortgage that you're getting,
is the right product at the right lender.
I think 2020 will prove to be the year
that interest rates started to matter less,
and flexibility started to matter more.
And again, this all centers around making sure
that your mortgage has a low penalty,
and the ability to switch to a different lender.
And rule number seven,
when it comes to renewing your mortgage in 2020,
is use a broker, just do it.
The math on this is simple,
and I'm not saying this because I'm a broker,
I'm saying this because it makes sense.
Brokers have access to more options,
more lenders, more flexibility, and quite frankly,
the best mortgage products are those offered by companies
like First National, and CMLS, and Merix Financial.
The big bank five year fixed products simply cannot beat,
the products offered by monoline lenders
that specialize in mortgages.
Think of it this way,
you can go to Canadian Tire and buy a bike,
or you can go to Bull Cycle and buy a bike.
Bull Cycle specializes in in bikes, Canadian Tire doesn't.
There's a pretty good chance when you go to Bull Cycle,
you're going to get way better ride
than you would at Canadian Tire.
And most importantly, when you hire a broker,
they have the ability to choose
to represent you and only you.
That means they have no fiduciary duty to the bank.
They have an obligation to be honest and competent,
but they can choose to represent you and only your interest.
It's basically like hiring a doctor or a lawyer,
only for your mortgage.
A banker on the other hand,
has to do what's right for the bank,
and this means that their job is to get you to sign up
for the mortgage that will make the bank the most money.
So tell me in the comments below,
which one of these rules
do you think is the most important
for renewing your mortgage in 2020?
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