Thursday, December 20, 2012

Smarter Mortgage Choices

Let's make smartER Mortgage Decisions

When you bought your home, you thought you were staying a while.  Either you continue with your mortgage to term and renew or you may need more options.

Breaking your mortgage prior to the renewal or renegotiating may involve penalties.  You may have an opportunity to benefit from the new lower rates by renewing now; even with a penalty.

We can Deal with a Renewal or Refinance

If your mortgage is with a Canadian Bank that is federally regulated by Financial Consumer Agency of Canada.(FCAC)  The Bank needs to provide you with a minimum of 3 weeks notice of the Offer to Renew and under what terms and conditions.

You knew this was coming and you should have been shopping around. But there is more here than just the interest rates.  Each Statement, each question posed to the LENDER resulted in additional costs. Now there are discharge fees in addition to Re Registration with another lender; so you need to factually examine your options. Get involved because your mortgage is a major component of your monthly household budget.

Allowing your mortgage to renew automatically does not mean you are getting the best possible terms and conditions.

Switching to a New Lender will require re-document and re- registration. You are in effect applying for a new mortgage and the NEW Mortgage Rules will apply.  Verify exactly what those costs will be.  Your new lender may absorb some of those costs to attract your business. IE Legals, Appraisals, Registration Fees...   Negotiate!

Use an Independent Mortgage Broker that will shop the open market for you to secure the best interest rate and terms for you.  Compare the Mortgage Brokers Offer with the renewal from the Bank. This may be your opportunity to include some higher interest rate debt to lower your monthly payments. 

Your Mortgage Broker can help you understand and read your mortgage documents.  If you have a closed mortgage, you bank may or may not allow you to break the mortgage.  If you are permitted to break the mortgage you will be paying some fees and possibly penalties.

They will tell you if:

  • you need to pay a penalty and what that amount is
  • you need to pay an administration fee
  • you need to pay legal or disbursement fees to discharge the old mortgage
  • you need to pay legal or disbursement fees to register the new mortgage
  • you MUST repay some or all of any “cash back” you may have received when you first obtained the mortgage
  • the calculation of any prepayment penalty would be based on the posted rate at the time you signed your mortgage agreement, or on a discounted rate if you negotiated one for your initial mortgage.

A Mortgage Penalty can be reduced if you make a permitted PREPAYMENT prior to renegotiating.  This would appear counter productive if you are adding in credit card debt or other bills. 

You could renegotiate PRIOR to the Renewal with a Blend and Extend option which simply put will mathematically average the mortgage balance and interest rates. This may be worthwhile if you have a higher interest rate mortgage to combine with Today's low rates.

If you blend and renew at a lower interest rate your payment stays the same; so even with a potential penalty added in to the mortgage balance you may effectively pay it off sooner because of the interest rate savings.

The Decision is yours. A mortgage is often one of the biggest financial commitments you will ever make, so it is worthwhile to do your homework, include knowledgeable and experienced people to help you when you are mortgage shopping, compare the entire package offered by each lender. In seeking the lowest interest rates, consider the features (such as ability to make prepayments or to increase your regular payments) and the services that are important to you and addition fees that may apply.

How can I help you today?

Veronica Thompson, a Mortgage Agent with Mortgage Alliance Accumetrix (License #12036)

David Pylyp
Etobicoke Real Estate Agent
RE/MAX Realty Specialists Inc.,
416 233 9000 or direct at 647 218 2414      

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