How To Get A Better Mortgage

Renewing a mortgage

Arranging a new mortgage is one of life's milestones. I mean, how often do you sign your name and immediately assume responsibility for a chunk of debt measured in six figures?

Once, maybe twice, in a lifetime for most people, which is why this chapter starts off with advice on renewing a mortgage, something you could easily do half a dozen times or more until your home is yours, free and clear. Here's some math from a former bank mortgage executive that emphasizes how important the mortgage renewal is: as of mid-2006, the total amount of outstanding mortgages was worth roughly $660 billion, with about $80 billion of that representing new mortgages and the rest representing existing mortgages. Of that $580 billion or so in existing mortgages, about one-third ($193.3 billion) was up for renewal during the year. Given the rather immense amount of money being renewed each year, it's a surprise to hear from our former mortgage insider how many people sign and send back the mortgage renewal form sent to them by their banks, even though the rate being offered is not discounted at all. "If I told you how many people do this, you'd be floored," the insider said. "It's close to 30 per cent."

Would you buy a car and pay the price listed on the sticker on the window? If you pay your bank's off-the-rack mortgage rate, you're making the same mistake, but maybe five times worse (car: $30,000; mortgage: $150,000). Never -- repeat, never -- simply renew a mortgage without trying to arrange a better deal. In fact, mortgage renewals should be treated as an opportunity, not a formality. After living with whatever choices you made the last time you arranged a mortgage, you're now back in the cockpit with a chance to do better. Here's your game plan:

1. Research the market: Find out where mortgage rates are, and where they're expected to go. Then, see what deals lenders are offering.

2. Call, e-mail, or visit your lender: Who knows, you may be offered a great deal right off the top, thus ending the renewal process. Failing that, get your lender's best offer and go elsewhere to see what you can do to beat it. And, yes, you can conduct mortgage negotiations by e-mail. I once renewed my mortgage through an exchange of e-mails over several days with a mortgage rep at one of the banks I patronize. We never met face to face.

3. Choose your lender: It's always easiest to keep your mortgage where it is, so give your bank one last chance to hang on to your business. Frankly, the convenience of staying put is probably worth an incrementally higher interest rate.

If your current lender won't deliver the rate you want, then you'll find other banks, credit unions, and mortgage brokers eager to win your business. Often, they'll demonstrate their eagerness by absorbing any legan and administrative costs involved in transferring your mortgage (these could add up to several hundred dollars otherwise). As well, your existing lender may charge a mortgage discharge fee of $150 to $250. Be sure to ask your new lender to pick up the tab -- remember, it's competitive out there.

Toronto Real Estate Board: Sound future for residential real estate in GTA

Ownership has become a passion for the people of our city.

In fact, annual records for the highest number of resale housing transactions in our city have been set in three of the past five years. In 2004 there were 83,501 sales; in 2005, 84,145 homes changed hands; and in 2007 there were an incredible 93,193 transactions.

The Multiple Listing Service is a database of property listings accessed by realtors who use it to match buyers' preferences with properties listed for sale. It posts sales volumes, average prices, days on the market, housing type and neighbourhood.

Statistics are published in TREB's monthly Market Watch report, which is available on our website, torontorealestateboard.com.

The most recent data shows that, after a lull in the early part of this year, our real estate market has returned to its former vitality. Both June and July set monthly records for sales volumes.

Last month, GTA realtors reported a record 9,967 sales, up 28% from July 2008. The average price for July transactions was $395,414 - up 6% compared with the same month last year.
In Toronto, there were 3,880 sales, up from 3,132 in July 2008, with an average price of $421,110 compared with $395,343 a year earlier.

In the 905 region, 6,087 transactions were reported, up from 4,674 a year ago, with an average price of $379,035 compared with $355,401 in July 2008.

With 16,915 properties available for sale, July's active listings were down 36% from a year ago when 26,543 properties were on the market.

Most significantly, low borrowing rates continue to make homeownership more affordable. Immigration is another key factor. Toronto welcomes nearly 100,000 newcomers to Canada each year, the vast majority of whom eventually purchase a home.

The autumn months may bring some seasonal moderation to the market, however, this summer's numbers demonstrate that the future is bright for GTA real estate.

On the national front, the Canadian Real Estate Association reported 147,351 sales in the second quarter, up 1.4% from the second quarter of 2008, marking the first year-over-year increase in quarterly activity since the fourth quarter of 2007.

Parts of the U.S.'s resale housing market are also gaining traction. According to the National Association of Realtors, home sales in June rose from the previous month, marking three consecutive monthly increases.

Even if you're not a real estate buff, it's important to keep an eye on market activity, as it reflects the overall health of our economy. In fact, according to a study by the Canadian Real Estate Association, one out of every 100 jobs depends on spending associated with resale housing transactions - on things like renovations, furniture and appliances. This study also found the average resale housing transaction in Ontario generates more than $47,000 in economic spinoffs.