Over the last decade or so, almost every year has seen another tweak to mortgage qualification rules. However, one segment that hasn’t seen many changes is the renewal market. As of now, as long as you’ve been paying your mortgage on time, there are no rules for qualifying for a renewal with your existing mortgage lender. This isn’t likely to change as your lender will want to keep your business. However, your original lender’s current rates might not be the best available. Transferring a mortgage to a new lender could be an option worth exploring.
If you are keeping the dollar value of the mortgage the same and transferring to new lender, and your income and credit profiles are the same or have improved, the process is simple. If the existing mortgage was originally high-ratio insured (less than 20% down at time of purchase), most lenders will grant a transfer at very competitive high-ratio rates. If it wasn’t originally insured, not to worry. Most lenders will still offer reasonably competitive rates on a transfer. Qualification can be a bit more difficult though. As of January 1st, these originally un-insured transfers must now pass a new “stress test” with the new lender, requiring qualification at an interest rate higher than the contract rate.
Another wrinkle could arise if your original mortgage was registered as a collateral charge, which is the case for most re-advanceable mortgages (mortgages with a secured line of credit component). Many lenders have taken steps to address this “wrinkle” and now have specific programs available which allow the transfer of these mortgages. A few years ago, this wasn’t the case.
Regardless of the type of transfer, most lenders will cover some or all of the transfer costs for bringing your business to them. So it really does pay to explore your options.
When it comes time to renew, you may decide you’d like to consolidate other debts or perhaps access some of the built-up equity in the property. As soon as you add any money to your mortgage balance, it becomes a refinance. You are no longer eligible for qualification under transfer guidelines and must qualify under the new refinance “stress test”. See our previous blog post here for more details.
As you can see, there are many options available to you at renewal time. We always try to reach out to our clients when their mortgage is coming up for renewal, just to make sure that you have the best mortgage suited for your specific goals. It’s definitely worth having that conversation, even if the end result is to stick with your current lender for another term. Feel free to contact me anytime to see what I can do for you!