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.

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Excerpted from How to Pay Less and Save More For Yourself by Rob Carrick. Copyright 2006 by Rob Carrick. Excerpted by permission of Doubleday Canada, a division of Random House of Canada Limited. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.