Most Canadians are in the habit of depending on their bankers to provide them with everything they need to know regarding their mortgage needs. While banks do ensure that you understand the formalities and technicalities surrounding mortgage payments and renewals, there are a number of truths which your bank may be withholding in order to favour its own interests.
At the end of the day, the bank’s goal is to ensure that they also make as much money as possible. So, in order to secure your own interests and wisely renew your mortgage, it is necessary to know the following facts which your bank may conceal from you:
The “special offers” are not your only options
When it’s time for a mortgage renewal, your bank will probably bombard you with “special offers”. These offers are not the best in the market, rather, the bank sends them in the hopes that you will not look for others on your own. Therefore, come renewal time, you are encouraged to consult a mortgage professional and optimize your decision using the truly best options on the market.
Variable rate mortgages are beneficial
The standard mortgage rate product among Canadian homeowners is the five-year fixed rate mortgage, and understandably so. It allows one to feel secure knowing that their interest rate is fixed, and banks also prefer that you go for it. Therefore, they will often conceal from you the benefits of a variable rate mortgage.
In terms of paid interest, research has demonstrated that the variable rate mortgage beats its fixed counterpart 9 out of 10 times. Variable rate mortgages are not only kinder to your wallet, they also come with less severe pre-payment penalties; a 3-month interest penalty if you break a mortgage early. Break a fixed rate mortgage, and the consequences are less forgiving.
Posted rates can be negotiated
The bank’s “posted rates” are not indicative of the real rates in the market, and are in fact negotiable, even though they may be portrayed otherwise. Banks typically offer posted rates which are 2-3% higher than real market rates, and those who are unaware of this accept the first offer presented to them. Therefore, you must ensure that you do diligent research before you start any negotiations, and remember to always ask your mortgage broker for their rates.
Being a good and loyal customer will not change your rates
It is important to understand that paying down your mortgage responsibly and banking with the same bank for years won’t make any difference come mortgage renewal time. Research by the Bank of Canada reveals that loyal customers are not guaranteed as a good a deal by their bank as they would be if they opted for a different lending institution. What’s more, the survey effectively demonstrated that using a mortgage broker can result in obtaining a lower rate, as brokers receive multiple quotes from numerous institutions.
And so, rather than simply signing the mortgage renewal papers the bank places before you, Mortgage Guys advise you to pay heed to this advice and tread carefully come mortgage renewal time, in order to safeguard your best interests. In case you have any queries or wish to make a switch, Mortgage Guys are seasoned mortgage professionals who will gladly help you out with all mortgage-related matters!