When you sign a mortgage agreement you may not be aware of all the features of that particular mortgage. Over the last few months, an increasing number of people looking to renew their mortgage are not finding it as easy as they expected. As we analyse their mortgage specifics, we note they have several different mortgage portions, with separate renewal dates. For example, a $200,000 mortgage in three portions as follows: $100,000, 5 year fixed rate mortgage, $50,000, 3 year fixed rate mortgage, and a secured line of credit. The two fixed mortgage portions each with different renewal dates.
How does this happen? In the past, when you would move to a bigger home, you were able to take your current mortgage with you and increase the size of the mortgage. You would have one rate, one term, and one renewal date. Today, when you move from one property to another with most major banks, you keep your current mortgage as is. They then add a 2nd portion for the additional money you need with an additional term, rate, and a separate renewal date. Essentially you have two mortgages under one umbrella.
As clients approach the renewal date of their mortgage, they have an opportunity to move their mortgage to a different lender, without paying a penalty. This forces lenders to be competitive. Having two mortgage portions, with different renewal dates makes this difficult. We call this “The Mortgage Trap”. Banks know since your renewal dates differ, you will have to pay at least one penalty, and so they offer you higher renewal rates. If you move the mortgage to a different lender you will pay a penalty, and nobody likes paying penalties.
At Champion all we do is mortgages. We are experts at finding the right mortgage for you, one that offers the ability to keep one mortgage, with one term, one rate, and one renewal when you move. This saves you money over the life of your mortgage.
If you have any questions about “The Mortgage Trap” or would like to know if you are in it, give us a call at 1-877-341-1299.