• Renewing Your Mortgage? It Pays To Get The Best Rate!

  • I was contacted yesterday by a new potential client, who had just received her renewal letter from her current lender.  She was being offered a 5-year fixed at 2.99%.  Being aware that current rates are not that high, she reached out for a second opinion to see if I could do better!

    She had great income, beacon score was over 700 and her debt ratios were in line for a lending rates, so why was her current lender offering her a crappy rate?

    RENEWING YOUR MORTGAGE

    It is a fact that Banks through their marketing efforts, the push from their mortgage specialists and front-line desk people, that they are renewing more mortgages today than they were just after the 2009 crash. The surprising fact is that they are renewing most mortgages at posted rates.

    So what is the difference between posted and discounted rates?

    Posted Mortgage Rates are rates that banks send to their existing clients when they contact them for their mortgage renewal. Any rate that is not discounted to the absolute lowest rate is a posted rate.

    Conversely, Discounted Mortgage Rates are the rates your bank doesn’t want you to know about and are usually only offered to those clients with the top beacon scores and who don’t really need these rates because affording that mortgage is not an issue. It’s a hook that the bank uses to retain that triple A client.

    At renewal time, bank’s contact clients a few short weeks prior to their renewal knowing that over 75% of their clients don’t shop their mortgage rate and will just renew with their existing bank at a higher rate. It’s the convenience factor! A bank will rarely offer their client the lowest interest rate the bank has access to at that particular time, ie. the discounted rate.

    Most banks will claim that their rates being quoted are the most competitive in the marketplace. If you are not educated or savvy when it comes to rate shopping, you are more than likely to believe their claims and worse not bother to rate shop. Or, you might have gone through some tough times, are worried whether you will get a renewal, are happy you did get that renewal and are satisfied to sign it back.

    Don’t feel bad – this happens quite frequently because the bank will usually send you your renewal only a few short weeks before renewal, which you are then forced to sign back because you did not have time to rate shop. This should be a reminder to do the work, take the time, speak to a mortgage professional who can assist you. Remember mortgage specialists at the bank are not licensed and therefore don’t need to know about the entire mortgage marketplace.

    A mortgage agent or broker on the other hand, has had to become licensed and it is our fiduciary duty to ensure you are getting the best rate and product possible.

    So let’s look at an example with the difference in costs based on her renewal amount:

    Mortgage Renewed at $200,000

    Posted Rate – current offering is 3 year fixed at 2.99% from her lender

    Discounted rate – what I can get through my lender is a 3 year fixed @ 2.49%

    Posted – current offering is 3 year fixed at 2.99% from her lender

    Mortgage $200,000
    Rate 2.99%
    Term 3 years
    Amortization 25 years
    Monthly Mortgage $945.47
    Interest Accrued Over term $17,049.13

     Discount – what I can get through my lender is a 3 year fixed @ 2.49%

     

    Mortgage $200,000
    Rate 2.49%
    Term 3 years
    Amortization 25 years
    Monthly Mortgage $894.94
    Interest Accrued Over term $14,173.46

    Wow – that’s a lot of money! I would think it would be worth your time to get a second opinion. Remember, when dealing with a bank, they only have one product to sell you – theirs! But when you deal with a mortgage agent or broker, we have many different mortgage products at our disposal.

    As a licensed mortgage agent servicing the GTA, York Region and other areas I can shop your mortgage with over 42 lenders in the marketplace. I will help get you the mortgage product that fits your lifestyle best and in turn will get you the best rate possible –not what is the current posted or discounted rate but what is possible with your current beacon score and debt ratios.
    Reach out to me today to find out what rates you qualify for at renewal time.  It could save you thousands of dollars in unnecessary payments as well as accured interest.  Money you can put elsewhere!