Switching Lenders at Renewal

I find it hard to believe that banks are still playing the same games I witnessed 15 years ago when I entered the mortgage industry as a mortgage broker. This month I had a client contact me about his mortgage that was coming up for renewal in less than 2 weeks. He still hadn't received anything from his bank in the mail and I advised him to get something locked in asap.

The mortgage renewal process turns out has not changed that much in 15 years despite the sharp increase in competition amongst lenders. My client did end up getting his renewal notice in the mail 4 days prior to his renewal date. Unbelievable! The late arrival of the renewal notice is no mistake since the bank was likely hoping the client overlooked his renewal date and was now left with little time to consider other options - Not true. To add insult to injury, the bank's offering was 1-10 year terms at posted rates, and no mention of the popular variable-rate mortgage. No coincidence, the banks make far less money on the variable-rate mortgage on average.

If this sounds familiar to you, or if you are coming up to your own renewal date soon, there's another option you need to know about. Most lenders have switch programs. That is, the other banks who covet your mortgage business will switch or bring you over to their side and pay out your existing lender. Under their switch programs, the costs to bring you over are picked up by the lender. Since you represent new business to the second lender, you are offered the best rates in the market - not posted rates, and all available products, including the variable-rate mortgage.

The real advantage to switching lenders however has to do with the timing. New lenders vying for your business will protect a rate for you up to 120 days in advance of your renewal date. Think about it. If you are facing a renewal date 4 months from now, and there is concern about interest rates going up, you will want to lock in a rate as soon as you can. Unfortunately, your current lender will not likely lock a rate in for you until you are 30 days from renewal.

So for a small investment of your time, talk to your mortgage broker 4 months in advance of your renewal date. Get a great rate with the protection you need, and save!