Most lenders allow you to renew your mortgage and gain additional funding to buy a bigger home, but there are hidden traps that you need to avoid during this process.
A typical mortgage loan takes up to twenty-five years to pay back, and it’s perfectly possible that you might need another line of financing for a new home during this period. That’s why a large percentage of borrowers eventually apply for mortgage renewal, which is a sound strategy that requires flawless execution in order to be profitable in the long-term.
Avoiding tactical mistakes is paramount, as even the slightest difference in interest rates or other terms could translate to thousands of dollars. Because of the sensitive nature of the transaction, you would be well-advised to read this summary of commonly forgotten factors that could significantly affect the total amount of money you will have to return over the lifetime of the deal.
1. Ignoring the rate drops
Mortgage renewal is the only opportunity you have to get better conditions for your loan, and smart homeowners time their applications well to take advantages of favourable changes in the prime rate. If you are on a fixed APR loan, some lenders might not give you the benefit of better rates available to new customers, but they can’t deny you if you enter a renewal procedure. To profit from a rate drop, it’s necessary to follow the Canadian mortgage market very closely and wait until the right moment to file an application for a new mortgage. The window of opportunity might be very short, and you need to be alert at all times to strike gold.
2. Failing to insure the property
It’s a great idea to obtain insurance on your new home at the same time when you are negotiating the financial support for the purchase. This way, you can get a package deal that reduces the risks to a minimum and keeps you well protected from nightmare scenarios. As you can hear from any home buyer, Guelph is a safe area where emergencies or natural disasters are rare, but that doesn’t mean your property is immune to accidental damage. Since mortgage renewals are usually taken for high-value homes, getting a proper insurance is even more important on your first time home purchase.
3. Rushing the decision
Far too often, people just go for the first offer they get, leaving a significant chunk of change on the table. Mortgage renewal is negotiated maybe once in a decade, so it would be naive to make a decision without spending several months on research and deliberations. Your current lender might make a pitch that sounds attractive, but nothing should be taken for granted when it comes to finances and you should always look at a few competing offers. If you are not familiar with legislative and commercial situation related to real-estate in Canada, it makes sense to seek professional advice before making any long-term commitments.