If you’re in a mortgage that’s coming up for renewal in the coming months and you’re considering just staying with your current lender, you wouldn’t be alone.
According to the Canadian Mortgage and Housing Corporation’s (CMHC) Residential Mortgage Industry Report released in the summer, in 2018, the number of mortgage renewals with the same lender increased by 16 per cent over the previous year.
The report suggested one of the factors that may have contributed to large increases in loan renewals with the same institution is the tighter approval criteria. In other words, people are worried they may not qualify for a new mortgage if they switch lenders, so they’re staying put.
You’ll remember in the fall of 2017, OSFI, (the Office of Superintendent of Financial Institutions) the agency that regulates the financial industry, announced tighter rules on mortgages. The biggest change is related to uninsured mortgages (homebuyers with 20 per cent or more for a down payment). These homebuyers are now required to go through a “stress test”. The changes came a year after a similar stress test was introduced for insured mortgages.
If the tighter mortgage rules still have you stressed as you face a mortgage renewal, the CMHC report noted the approval rate for same lender renewals remained stable at 99 per cent. Renewals are not specifically subject to the new stress test and are more likely to meet current lender criteria, the reported noted.
So, does that mean you should just automatically renew your mortgage with the same lender when your term is up? Not necessarily. You need to reach out to a mortgage professional to get the best advice.
For starters, most lenders will send you a renewal letter when there’s between three and six months left on the term. Typically, the lender will offer you a rate at that time and all you’ll have to do is sign at the bottom line to roll over your mortgage.
But beware, lenders often offer a higher rate than for a new client because they’re hoping the ease of renewal will keep you from seeking out a new lender and lower rate.
Ask yourself “Is it worth the time and effort to save a few basis points off your rate, or a few hundred dollars over a term to make the switch?”
For some, it won’t be. If a switch can lead to saving thousands of dollars it would certainly be something to consider. While everyone’s situation is different, the larger the mortgage, the bigger the savings will be when you find a lower rate.
Often, homeowners will just use the bank their parents recommend for their first mortgage. But they might find themselves not happy with the service or terms of the mortgage and may just want to switch to a different lender as the mortgage comes up for renewal.
If that’s a situation you find yourself in, you have options, and a mortgage broker can help you make the best decision.