• I am currently looking to refinance my mortgage. Being a mortgage agent, I thought I would document my own experience so I could share with my readers.

    I was with a lender for the last 5 years and knowing how lenders can sometimes play games, was not surprised at all when the rate being offered was higher than the going rate. Why? Many people don’t even bother to read their renewal statements – they blindly sign and send it back without knowing what the renewal will cost. Lenders count on that!

    For instance, you might have had a lower rate but in the time that has passed, the fixed rates might have gone up or down. A 1% difference can cost you thousands in interest payments alone – is it not worth your time to make sure you are seeking the best rate and that the rate being offered is in line with what you can qualify for?

    My current rate is 2.25% and the offered rate for a 5 year fixed was 2.74%. When I called to negotiate they were not willing to offer me any better, so I went shopping.

    I knew I wanted an “All-in-One” Mortgage or Readvanceable product. Why? The All-in-One offers 1 mortgage with a Line of Credit. As I pay down the mortgage, the principal becomes available to me in the Line of Credit portion – which is fantastic for me as I am a real estate investor and can use those funds for downpayments, other investments, etc.

    The added benefit is that borrowing to invest in non-registered assets, unlike borrowing for a family home, allows interest to be tax deductible, thus investing in 2nd mortgages and the like…but that’s another post!

    I only had a few readvanceable products to choose from but more importantly were the rates and the features. I also knew that I could qualify for A rates and that I wanted a 20/20 pre-payment privliedge and not the present 15/15 pre-payment priviledge I currently had.

    In the end I am happy with what I got but I thought I would list a few things you should consider when you are looking to refinance.

    #1 – Always get the help of a mortgage agent/broker – we can pull your credit bureau once and shop for the best rate and product on your behalf. This saves you time and money. Don’t make the mistake of shopping around yourself – you not only come across as a rate shopper but your credit bureau will take a hit as you go from bank to bank.

    #2 – Start at least 3-6 months before your renewal is up. Most lenders will guarantee the rate for that long, which means that if the rate drops you get the lower rate and if it goes higher, you get the negotiated rate. This also gives your broker ample time to get the best rate for you. Furthermore, if you have had credit issues you might not get a renewal from your present lender, so you want to leave time for your broker to also shop the marketplace for the best rate you can qualify for.

    #3 – Look at your overall costs – not just rate! If you first took out a 30 year amortization and can now afford to refinance your mortgage with a 25 year amortization, not only will you save on thousands of dollars of interest but also the time it will take you to pay off that mortgage.

    #4 – Do the math on Variable vs. Fixed. Keep in mind how long you plan to stay in your house. Remember you can lock in a variable rate at any time and when the spread beween a Variable and Fixed is so small, it does not always make sense to go with fixed right off the bat. If you see breaking that fixed mortgage prior to the end of the term, you will incur a higher penalty than a variable.

    Get educated and know your choices. It will save you money when refinancing your mortgage.