iNVEST A LITTLE TIME TO REAP SUBSTANTIAL SAVINGS ON YOUR MORTGAGE RENEWAL

If your current mortgage is coming up for renewal and you would like to save money and time, please read this post.

I'd like to explain the mechanisms that enable mortgage brokers to often present more favourable rates at the time of mortgage renewal.

Mortgage brokers have access to a variety of lenders, many of whom employ a financial tool known as "back-end" loan insurance. This insurance, typically provided by organizations like the Canada Mortgage and Housing Corporation or similar private organizations, is purchased by the lender after funding the mortgage, without the borrower's knowledge. Its primary function is to mitigate the lender's risk should the borrower default.

This risk mitigation allows the borrower to qualify for lower interest rates, as the lender's exposure is decreased. Smaller lenders, in particular, are inclined to adopt this insurance strategy, thereby transferring the cost benefits to consumers in the form of more attractive rates.

Contrast this with the business model of traditional banks, whose expansion and established reputation are more important to attracting and retaining customers than rate competition. These institutions do not require back-end insurance and can self-insure against defaults with adequate capital reserves.

As a result, bank rates on renewal are usually higher than what's available in the broker space.


Here's a hypothetical example:

Loan amount $550,000
Remaining amortization period: 15 years
Bank Rate: 5.49%
Term: 3 years

Loan Amount $550,000
Remaining amortization period: 15 years
Broker Rate: 4.90%
Term: 3 years

Total savings experienced over three years: $12,522 or $4,174 per year or $347.73 per month.

If you have a mortgage coming up for renewal, I would be happy to discuss or help you understand your options.


Sarah Colucci, Mortgage Agent
Sherwood Mortgage Group, Broker 12176
Direct: (647) 773-4849
Email: [email protected]


#mortgages #mortgagerenewal #mortgagebroker #interestrates #mortgageadvice #mortgagetips #homeowner #propertyowner

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