Falling for These Mortgage Renewal Myths Will Cost You

Renewing your mortgage is a chore — and one that few homeowners look forward to. But assuming that there’s no point in shopping for better rates is just one mortgage renewal misconception that can cost you money, anxiety or both.

Myth #1: Every lender offers essentially the same rate

“The rate variance between lenders can be significant,” says Clinton Wilkins, founder of Clinton Wilkins Mortgage Team in Halifax. People who accept their lender’s initial renewal offer without looking into any other options are probably leaving money on the table. “Typically all lenders offer clients that are coming up for renewal even higher rates than what new customers are getting,” he says.

You aren’t obligated to renew elsewhere just because you start looking. “The worst case scenario is you need to renew with your existing lender,” Wilkins says. If you were considering doing that anyway, that’s not much of a risk.

Sometimes it does make sense to stick with your initial offer. For example, if your credit score has dropped sticking with your current lender will allow you to avoid going through another approval process.

“But I would say, for the majority of the clients that we see, there is a cost savings [to switching lenders],” Wilkins says.

Myth #2: You’ll pay high fees to switch to a new lender

“I think the average consumer should assume there’s going to be no fees when their mortgage renewal comes up, even if they’re changing lenders,” Wilkins says.

Some of the fees you pay when you get your first mortgage, like registration fees and title insurance, aren’t part of renewals. Any fees that do apply are often paid by the new lender — the price to acquire your business.

There are a few circumstances where homeowners might pay fees, however. ​​Wilkins says renewing with an alt or private lender can cost anywhere from a few hundred to thousands of dollars, even if you are renewing with the same alt lender. Fees in these cases typically aren’t waived.

If you have a collateral charge, such as a home equity line of credit or some other loan secured against your home, renewing with a new lender could be complicated and come with fees. A mortgage broker can help you navigate your options, and lenders could waive those fees to earn your business.

If you shop without help from a mortgage broker, be skeptical if fees show up on an offer, regardless of the type of mortgage you need.

Request that fees be waived, and ask if the lender is offering any promotions. Your request may be only partially met. It may be denied. But it’s worth asking. Remember that, while your goal is to find a mortgage that fits your needs, a lender’s goal is to earn your business.

Myth #3: Looking for a better rate requires a lot of time

“I think the misconception is that clients think that it’s a lot of work,” Wilkins says. He tells his clients to expect to dedicate about five hours to the task of switching lenders.

Want to save time? Work with a mortgage broker, who has quick access to a wide range of lenders, instead of comparing lender offers by yourself.

Whichever route you choose, don’t doubt the value of shopping around at renewal time. Economic factors have led to higher rates across the board; don’t make it worse by settling for anything other than the best rate you can possibly get.