With the collapse of the housing market in 2008 across North America, many homeowners are still struggling to recover. There’s no doubt that owning a home can be a wonderful experience, but it can also be expensive. If you have found yourself a victim of the housing market, or if you are staying afloat but it’s time to renegotiate your mortgage, here are a few ideas to help you get a good deal on your next mortgage.
Plan in Advance
Many people think that getting approved for a mortgage is the end of the line – the American dream! But, if you are savvy and plan well, you can make a big impact on your mortgage renewal 3-5 years after getting approved for the initial mortgage. Because the housing market is so insecure these days, getting ahead isn’t always easy. Talk to your banker about putting an extra $50-$100 a month in a savings account each time you pay your mortgage to build up a small slush fund that you can use to pay down your mortgage when it reopens for negotiation. Having money to reduce the principle on your mortgage renewal can often get you a better interest rate – and knock years off your mortgage amortization.
Make it a Priority
You might think that getting a mortgage means you can set it and forget it, but if you keep your mortgage payments and renewal top of mind, you’ll be able to take advantage of good rates when they are posted. Thinking about your mortgage doesn’t sound like a fun way to spend any great deal of time, but set a reminder in your calendar about 6 months before the renewal date is up and be sure to check interest rates at your bank and competing lenders. Nearly all mortgage contracts state that you will need to pay fees if you break your mortgage before its maturation date, but when you start getting close to the date of renegotiation, many banks will waive the fees to lock in a mortgage for more years. This is an effective method for homeowners to save money, especially when you shop around and take different rates to different banks.
Don’t assume that locking in a mortgage is straight-forward. Many homeowners did not realize that variable mortgage rates could change so drastically until the market crashed in 2008. Not since the 1980s have we seen such unstable interest rates and many people remember all too well what that experience was like. When signing on for any banking product, it’s important to ask questions, but it is especially important to ask about mortgage rules and regulations. If you do plan to put a nest eggaway to pay down your mortgage faster, be sure to ask about important dates for doing so and how much you can pay without penalty. If you didn’t know that you can pay extra fees for actually paying down your mortgage faster than agreed upon, you can. How do you think banks make money? You’re locked into that contract so if you want out, ask questions.
Whether you are saving for your first home, or you are about to renegotiate your tenth mortgage, there’s always something to learn about the market and how you can put yourself in a better position financially. Remember that you can shop around. Just because you bank with one financial institution doesn’t mean you have to commit your mortgage to that institution. You don’t owe the bank anything – in fact, it should be the other way around. Your only job is to get the best deal you can. It’s the banks job to compete for that deal. Putting a little money away each month over the life of your term mortgage, making your mortgage negotiations a priority, and asking the right questions before during and after a mortgage has been negotiated or renegotiated can make all the difference to your pocketbook. And with so much of your hard-earned money going out the door, wouldn’t it be nice to know you are saving some money on a lifetime investment like your home? Keep these tips top of mind and implement them as a way to help save you money in the long run.