Until recently, homeowners looked forward to renewing their mortgages as they were likely renewing at a lower rate and had several financial institutions competing for their business.
Consumers were negotiating from a position of power knowing they could leave without penalty if their demands were not met.
This is no longer the case as much of the negotiating power has shifted back to the financial institutions due to the expansion of the mortgage stress test.
When your mortgage is up for renewal, your financial institution will mail a letter stating the new term and interest rate of your mortgage. In most cases, you are not subject to the mortgage stress test and are simply signing the letter to renew your mortgage — easy.
The downside to signing the renewal letter is that you are giving up your ability to negotiate. Unfortunately, if a competitor offers you a better rate you want to accept, you will be subject to the stress test to re-qualify for your mortgage.
As of January 1, 2018, all home buyers, regardless of the size of their down payment are subject to the stress test. The purpose of the test is to assess a buyers’ ability to afford mortgage payments at higher interest rates.
Borrowers must qualify based on the greater of Bank of Canada qualifying rate or your contracted rate plus two per cent. It’s a federal initiative, so only banks must follow the new rules. However most provincial-run financial institutions, such as credit union, have voluntarily adopted the stress test’s higher standards.
If you fail the stress test, you will not be able to move your mortgage and will have to accept the rate your existing lender is offering. If you are confident that you can pass the mortgage stress test, go ahead and shop around.
Gather all of the competing offers and request your current lender match the rate and/or conditions. If they are unable to so, consider moving your mortgage if the discrepancy is large enough and the new lender is willing to absorb most of the start-up costs.
I would also suggest you speak to a mortgage broker as he or she can determine the competitiveness of your renewal offer and your likelihood of passing the stress test.
If it is determined that you can pass the stress test, a broker will lay out the various options so that you are able to make an informed decision.
My top 5 tips for someone renewing their mortgage:
I am often asked what term and type of mortgage I would recommend.
When rates were declining, my product of choice was a variable mortgage. However last year, as rates began to rise, I locked into a fixed seven-year mortgage. This was the right choice for me, but everyone’s circumstances are different, so find a good broker who can walk you through all your options.
Hello Mr. Harry,Hope you are doing well. Kindly find below our testimonial. Majestic mortgages became our new years miracle and helped us start off 2016 with a smile in our new home! Working with Majestic mortgage was an absolute pleasure.From the first call till completion Mr. Harry and his team were exceptionally efficient.He took the time to understand our situation, explain all our options and recommend a mortgage plan that was best suited to our needs. All our questions were addressed to promptly and such a complicated process was clearly explained to us at every step.We did not expect to have everything done within such a short time frame but they still did it! Mr. Harry worked tirelessly and helped us get our mortgage when we thought that it was impossible. He even worked on his vacation to make sure things got done right and on time.We would just like to thank you and your team for everything.We would strongly recommend Majestic mortgage to anyone looking for mortgage services.
Mr. Harry: We have the house keys and we have the house. The process was smooth. Thanks to your excellent effort. You have been a great part of this experience. It is my pleasure having you as my mortgage broker and will recommend your service to all my family and friends. From my family to yours, thank you again and god bless.Regards, Sam Mallak
I would like to thank Harry Saund and Majestic Mortgage for helping me refinance my home. He was able to explain everything to me and didn’t hide any information from me. Everything was prompt and was always there to help me. He also got me the best rate. I would recommend Harry Saund and the team at Majestic Mortgage to all my friends and family.
I came to Majestic Mortgage looking to get my mortgage refinanced. The team at Majestic Mortgage and Harry were very helpful. Harry is very knowledgeable and helped me understand everything. They service was very prompt and efficient. He was available at all times of the day ad got me the best rate. I am very pleased with the outcome of everything and how smooth the process was. I would definitely recommend Harry and Majestic Mortgage to all my friends and family! Thank you again!--Mohsen
Majestic Mortgage and Harry Saund helped me when I needed help the most. My credit was not the best when I came to them. Harry was able to guide me in a way that would help reestablish my credit, and educating me throughout the process. He was there throughout my journey and I just wanted to send a sincere thank you for helping me out when I needed it the most. You helped me out when the banks would not! You helped me get everything done in a matter of time. Thank you so much again; I cannot say it enough times!--Kamaljit Rehal