23 Apr

Mortgage Renew or Switch lenders? How to save thousands of dollars!

Refinancing

Posted by: Kiki Berg

Renew (the mortgage industry meaning): to remain with the current lender by simply signing the renewal letter that comes in the (e)mail.

Switch (again, the mortgage industry meaning): to move from the existing lender to a different lender without leveraging any additional funds/equity; the outstanding balance remains the same.

Is renewing your mortgage with the current lender the best option, or should you consider switching to a new lender? The answer is provided with some simple math. As mortgage consumers, we want to save as much money as possible, plain and simple.

Seventy percent of borrowers that currently hold a mortgage simply sign the renewal letter they get. Most of the time they are leaving 20 – 40 basis points or 0.20% – 0.40% on the table. This puts millions of dollars back into the pockets of the lenders and their shareholders.

There are times when the current lender does not offer the best market rate or product for your situation. How will you know you are getting the best rate for your scenario? By contacting Dominion Lending Centres Mortgage Professional who works for you… not the lender.

So first things first: contact your DLC Mortgage Broker four months before the term matures to discuss the next term’s strategy. What do the next two, three or even five years look like? This will then lead to an interest-rate discussion. Can there be some money saved?

I have been working with a client over the past couple of weeks as her current mortgage is coming to maturity. Had she just signed at the bottom of the renewal letter she would have been overpaying by 15 basis points.

Current lender offered 3.39% for a 5-year Fixed term (Renew)

New lender offered 3.24% for a 5-year Fixed term (Switch)

Here’s what that looks like. Note the mortgage balance used was $330,000 (25-year amortization). This just happens to be the average mortgage amount in British Columbia.

Monthly Payment Annual Payment Payments Over 5 Yrs O/S Balance After 5 Yrs Interest Paid
3.39% $1628.50 $19,542.00 $97,710.00 $284,147.50 $51,857.50
3.24%$ $1602.64 $19231.68 $96,158.40 $283,354.22  $49,512.62
Total Savings $28.86 per month $310.32 saved $1,551.60 saved $793.28 ahead! $2,344.88 saved

The biggest saving is in the total interest saved over 5 years. At the end of the day this borrower saved $2,344.88. Guess what she decided to do? Yes, SWITCH lenders.

In this scenario, it will cost the borrower $0 to make a switch. Would you put $2344.88 in the fire? No, you would not.

Bottom line, make sure you have a discussion with your independent Mortgage Broker before (potentially) burning thousands of dollars.

Kiki Berg, Your Mortgage Strategist.

MICHAEL HALLETT

Dominion Lending Centres – Accredited Mortgage Professional
Michael is part of DLC Producers West Financial based in Coquitlam, BC.

14 Mar

What you need to know about Refinancing in 2018

Mortgage Tips

Posted by: Kiki Berg

Recently there were changes to the mortgage rules yet again, and one of the rule changes was regarding refinancing your home. At one point in the last 10 years you could refinance your home all the way back up to 95% of its current value, which in many cases has put that property what we call under water or upside down. Basically, real estate markets ebb and flow and if you refinanced to 95% when we were at the crest of a market wave then as markets rolled back you were underwater… clever huh.

Fast forward a few years and the government said ‘what a minute, that is dangerous’, and it was. Clients now had no options for that property except to keep it, hoping values came back or turn it into a rental and hope to break even. At this point the government now said you can only refinance your home to 80% of the value which of course meant you needed to have equity in the property of at least 20% to make a change. This was an insurable product for many of our monoline lenders at this point, so it was something that was competitive in the market.

Welcome to 2018 and today you can still refinance your home to 80% but the Office of the Superintendents of Financial Institutions (OSFI) and CMHC now say that as a lender you can no longer insure this product. What does that mean for the average consumer? First off, it means that lenders across the board are not offering the same rate for insured mortgages as they are for refinances. The point spread between insured and uninsured mortgages has grown to, on average, .30% higher for 5-year fixed rates and it is .55% higher for variable rates.

To add to this extra cost, the new rules of qualifying at 5.14% which is currently the benchmark rate, applies to all mortgages including refinancing. Overall, the changes make it tougher to refinance and forces Canadians to seek alternative options to take equity out of their homes. In many cases this will mean looking to the private sector at higher rates when they need that money. If you have any questions about refinancing, contact your local Dominion Lending Centres mortgage professional.

Kiki Berg

 

 

 

 

 

 

SOURCE:

Len Lane

LEN LANE

Dominion Lending Centres – Mortgage Professional
Len is the owner and founder f DLC Brokers For Life based in Edmonton, AB.