Whether you are a real estate entrepreneur or not, you may be one of those ‘good debt’ loving people who believe you can do more with the equity in your house by carrying a big debt at around 3% and using that capital for a greater return, than paying off your mortgage and doing nothing with all that ‘dead equity.’ NOTE: A recent study stated Canadians have more than 1 Trillion dollars in dead equity.
So, say your mortgage is coming due in 2 months, you could decide to lock in a rate anywhere from one to four months prior to your renewal date at a different institution at 2.79% for 5 years fixed.
So even though you are already locked in elsewhere, you can test what your current mortgage lender will provide. Usually about a month prior to your renewal they will send you a mortgage renewal notice. They could have (or should have) sent it to you two or three months before your mortgage comes due, but NO! They prefer to leave consumers less time to shop around and put them in a position to just renew.
Here’s the typical lender play. On the letter they send you it may say something like “Please indicate which option you are accepting by signing your initials in the appropriate area indicated and return your signed agreement.”
Of course you could just initial the 5-year fixed mortgage at the prevailing rate.
There also may include a section called “Get the best rate.” It may go on to say; “This is offered to extend to you our special interest rate hold guarantee provided you sign on or before the renewal date.” In actual fact all this says is that if the rate went down between now and about three weeks from now, you would get the lower rate.
Now of course this ‘rate offer’ may be 2% or higher than what you could get anywhere else. If you had a $500,000 mortgage, this would cost an additional $47,600 over 5 years by ‘just signing here’ vs. going to a another lender or mortgage broker three or four months in advance.
Here’s the thing. If you just pick up the phone and call the institution, they can most likely give you the discounted rate they are offering on all new business. This can save you tons just by making a phone call!
Sadly, the amount of people who just sign the renewal form and accept the higher rate is astonishing. Consider this; if a bank gets 5,000 people in the same $500,000 example to sign the renewal, which adds $42.8-million in profit to their bottom line each year!
So do yourself a favour and make the calls to a mortgage broker, some other lenders and to your current institution. You may as well play them all to get yourself the best rate…hey, it could save you thousands and increase your net worth at the same time!
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