Don't be misled by early renewals

Wait and see for better rates*

Early mortgage renewal notices may seem sincere, but they often have less to do with saving homeowners money and more to do with banks heading off their competition.

In fact, convincing mortgage holders to renew early is not a new tactic. Yet banks are using it more frequently today given the competitive market.

The process is simple yet deceiving. A bank representative will contact the mortgage holder with a special limited-time renewal offer to protect them from rate increases. The ploy preys on their client's fear of the unknown. "Is it better to lock in now when I know that rates are low, or should I wait it out to see if they will go lower?"

The problem is our fear of the unknown tends to override our normal sensibility, causing some of us to renew sooner than we should. In fact, the best strategy is not to renew at first contact, but to secure a rate hold for 120 days – either with a bank or broker.

What most people find upon waiting is the rate ends up lower than what was first offered by the bank. After all, four months is a long time in the world of interest rates.

Furthermore, as time gets closer to renewal, banks become more aggressive with their offers. In fact, to get the best deal, borrowers almost always have to either move their mortgages elsewhere or hold out until the last minute.

Regardless of whether you stay with your existing bank, renewal time is a good time to reassess your mortgage. Having an Accredited Mortgage Professional review your mortgage and look for ways to reduce it faster is an important part of the process. It can save tens of thousands of dollars.

Reassessing at renewal might also provide borrowers with an opportunity to free up capital and get into the revenue property game, which is one of the simplest and fastest ways to build wealth.

To learn more about real estate investing, Mortgage360's next Cash Flow Club meeting is Tuesday, April 28.

Nolan Matthias holds a bachelor of arts in Economics, is the co-founder of Mortgage360 and the author of The Mortgaged Millionaire. Call Nolan at 403-615-6132 with your questions or to set up an appointment with an Accredited Mortgage Professional (AMP).

* This content was produced by CREB®Now's advertising department, in consultation with Mortgage360. CREB®Now's editorial department was not involved in its creation.

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