Your bank contacts you to renew your mortgage and you’re thinking about signing your renewal, but is it in your best interest or should you talk to a mortgage professional first?
I had a client reach out to me when he was contacted by his bank to renew his mortgage that is up for renewal in May 2023. It’s quite normal for banks to contact their clients six months before their mortgage is up for renewal and offer an early renewal. The bank was offering to lock them in on a 5-year fixed rate at 5.45%. There are a few important things to consider when your bank is offering an early renewal, and this is what it would mean for my client.
Is the bank offering you the best rate? In this situation, the current 5-year fixed rate was 4.89% and this was not the rate the bank was offering my clients. The bank was offering their posted rate instead of offering their best rate to the client. Banks often do this because they know that 40% of people will sign the renewal documents without checking with another bank or a mortgage professional. My client would be renewing their mortgage at a rate that is 0.56% higher than what is available.
Are you looking to renew your mortgage or are you wanting to refinance? The bank associate didn’t take the time to talk with my client about their current financial situation or if they have any financial goals and how these factors would impact whether a renewal is the best option or not. A number of financial and life circumstances can impact what option is best for you. Maybe you are looking to move in the next five years, or you have plans to renovate, or your kids will be attending university. These are all factors that can determine whether you would be looking to renew or refinance.
How far out from your renewal date is the bank looking to get you to sign a renewal? Often when banks contact you to renew your mortgage, they call this a no fee early renewal. No fee may sound good but signing early could mean that you are paying a higher interest rate before you need to. In the situation with my client, they would be renewing their mortgage five months early at a higher interest rate than their current rate of approximately 3%.
In the end, my clients would be renewing their mortgage at a higher rate instead of the best rate, might be renewing when refinancing is a better option for their current situation, and instead of paying their mortgage at their current lower interest rate until May 2023 they would be paying a higher interest rate for five additional months. When considering your options for your next mortgage, remember that rates aren’t the only thing to consider. You should look to work with someone that considers all aspects of your financial situation to help you find an option that is best suited for your needs. If your current mortgage is up for renewal in the next six months, reach out to me today to start discussing what is best suited for you.
Bryan Dubord – Mortgage Professional
TMG – The Mortgage Group
306.537.3344
bryan.dubord@mortgagegroup.com