Renewing Your Mortgage

A 2008 CAAMP (Canadian Association of Accredited Mortgage Professionals) survey reveals that 86% of people renew their mortgage with their current lender. With this statistic available it is no wonder that banks do not offer the best rates available when it is time to have your mortgage renewed. Why would they when they know very few people will switch to another lender? If a customer calls phones to negotiate a better rate all the banks needs to do it lower their initial rate by a little bit and the customer is happy.

Currently one of the big banks has a special 5 year rate of 4.44% available. That is a full quarter of a percentage over what can easily be found on any mortgage broker’s website. Let’s compare renewing a $250K mortgage taking the banks initial offer to getting 4.19% elsewhere. The numbers are based on a remaining amortization period of 25 years at 4.44% I will be adjusting the amortization period on the mortgage with the rate of 4.19% to ensure monthly are the same.

4.44% over 5 years – Monthly Payments: $1375.36 Balance at the end of the 5 year term: $219,272

4.19% over 5 years – Monthly Payments: $1375.36 Balance at the end of the 5 year term: $216,058

It will cost you $3,215 if you just sign your renewal without asking for a better rate or moving your mortgage. Make that phone call or shop around. You may find that there are no fees involved when you move your mortgage or refinance at the end of your term. Take advantage of this and consolidate your debt at this time, you will save money.

Canada’s outstanding mortgage debt at the end of year in 2007 was $821.4 billion. If this rate differential is applied to the entire mortgage debt the difference is just over $2 billion a year. This is money out of the hand’s of Canadian families and into the hands of lenders.

Simply incredible!