The stress test implemented in January 2018 has made it more challenging for those looking to shop around when their mortgage is up for maturity. Given that all borrowers now have to qualify at the Mortgage Qualifying Rate or the contract rate plus 2%, some may not qualify at different lender or institution.
In the months leading up to your mortgage term maturity date, if in good standing, your lender may send you a renewal notice in the mail with a an offer for a new rate and term. Borrowers can simply sign this back to the lender but are they offer you the best rate and terms?
“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.”
About 6 months before your maturity date is a great time to get in touch with your Mortgage Broker. They will be able to advise you on your current ability to re-qualify and the products, rates, and terms they have to offer.
If you are unable to re-qualify, signing your mortgage renewal offer with your current lender will be your best option. If you are able to re-qualify, let your Mortgage Broker do their research to get you the best product, term, and rate.
5 things to consider:
- Don’t automatically sign the renewal offered by your current mortgage holder.
- Mortgages are more than rates. Given the new qualification rules consider a lender’s prepayment programs in case you stay with the lender long term.
- Credit scores are important, especially if you are re-qualifying.
- Postpone any new loans or credit until after your mortgage renews.
- Try and eliminate excess debt to help qualify at renewal time.