If you are like most Canadians, around 80% of us in fact, your mortgage renewal won’t take up much of your time. Usually, we get the renewal form from our mortgage lender, review it briefly, sign it and send it in without thinking about rates or other options that are available.
All too often we get caught up in the daily rigours of our lives and when it comes to something that can be done easily we simply take that option and run with it. Mortgagors (meaning banks, credit unions, lenders) know that Canadians are complacent and make the form as simple as possible for us to complete. Often only a check mark by the rate and term along with signatures on the bottom and boom, mortgage renewal complete. Phew that was easy!
Well, if you knew a little about how lenders bank on (pun intended) knowing their consumers behavioural patterns, you would know that you’ve done exactly as they’ve wanted you to. Review, sign, repeat.
Many think that since their bank helped them out in the beginning that you owe them something. Well you don’t, you’ve been paying interest and that’s their pay off. So don’t feel like you owe them anything, as I’m sure they are getting a healthy return or they wouldn’t have provided you with that loan.
Many of the major banks’ renewal forms have their fully priced retail interest rate listed on their renewal forms and most Canadians don’t do the research that could literally save them hundreds a month and thousands over the term of their mortgage.
In January, I had done a renewal for a new client that wasn’t happy with his existing institution as they offered him a renewal rate of 4.49% for a five-year fixed term, which was a 0.75% discount off of what their ‘full retail’ rate is- 5.24%. They told him that to get a better interest rate he would have to do more banking with them, such as moving his chequing and savings accounts along with lines of credits and so on. The banker told him that their best interest rates are reserved for those clients that do most or all of their banking with them.
Well instead of bowing to them, he simply turned on the internets and went to the ‘googler’ machine and typed in Red Deer Mortgage Broker and found interest rates that blew him away. Every site he went to had five-year fixed interest rates in the 2.94-3.19% range, an immediate 30% in savings with just a click on the Internet.
Instead of just taking that interest rate to the bank and seeing if they’d match it, he figured that he no longer wanted to be treated like a second rate client and took it upon himself to switch his mortgage to a new lender that he wouldn’t have to change his entire banking life around just to get a market priced interest rate.
One needs to understand that the bank will likely match interest rates if you give it to them, however if we lost every deal to the bank that just matched our interest rate, then we would soon go out of business and if we went out of business then the banks can go back on their merry way, doing what they’ve always done to you and the rest of the public because you will no longer have an alternative and a voice to obtain better mortgage programs.
The average discount on mortgages from the banks retail interest rate before mortgage brokers was .50% off of their posted rate, that discount has now increased to an average of 2.04-2.30%. Don’t be a sheep when it comes to your finances, do your homework it’ll save you thousands.
Jean-Guy Turcotte is an Accredited Mortgage Professional with Dominion Lending Centres-Regional Mortgage Group.