Renewing or transferring your mortgage
So, if you find yourself in this situation, get serious quickly about a renewal agreement and sit down with your lender. Once you've renegotiated an actual renewal contract, the interim mortgage can then be paid off and transferred into the new agreement.
If you choose to engage a mortgage broker to shop around for a better deal than your current lender offers, you won't pay any fees to the broker. These are borne by the new lender.
It's common for lending institutions to offer a hold on the interest rate they've quoted. This can come from your existing lender or from those you're testing the waters with for a better deal. Such rate holds can last anywhere from 30 days to six months.
There's nothing to stop a borrower from going out into the market for a better deal and taking it back to their existing mortgagor, who might be willing and eager to match it in order to keep your business.
Not all the bargaining power is on the consumer's side, however. If your financial situation has changed since the last time you signed your mortgage papers, even renewal of an existing mortgage will need approval. You may need to provide income verification and other financial information.
"We want to ensure that people won't take on risk they can't afford," says Frechette.
Like starting over
Signing with a new lender will require all the documentation a brand new mortgage would entail -- home evaluation, verification of employment, recent tax returns, etc.
Credit ratings will also be checked, but these won't include your previous mortgage payment record. So, if you were somewhat delinquent you won't be penalized; however, if you were a faithful and timely mortgage payer, it won't help your cause in terms of any new application.
Frechette says this is about to change, however, so that mortgage lenders will then have one more tool to assess risk.
Some institutions, such as CIBC, are offering incentives to transfer your mortgage to them. Their website states you can "get up to $200 towards your financial institution's transfer-out fee," but adds that it "must be from a lender approved by CIBC … restrictions may apply."
Renewal time is a good chance to consider the terms of repayment that could reduce your ultimate payout, such as weekly or bi-weekly payments, amortization periods or opportunities to pay down your principal.
Frechette says consumers need to educate themselves so they can get the best deal, but also one they can live with, especially if circumstances change in terms of income or employment. "You don't want to leave things to the last minute. Be prepared and do your homework," he says.
You need to have a good idea of your budget to decide whether you can withstand fluctuations in interest rates. "If you have no room in your budget for increases, you will want to take a longer fixed term. When you have a five-year mortgage, you're basically buying protection that you know what you'll be paying."
Hafer says the majority of borrowers simply stay with their existing institution at renewal time. But in a competitive marketplace, it pays to shop around to ensure you're getting the best deal for the biggest loan you're ever likely to have.
Then, you can forget about it all for another few years.
Diana McLaren is a writer living in Toronto.