Loyalty to your bank is so 1989
Canadian bank stocks are historically an incredibly safe bet. They are notoriously stable, often post incredible growth and pay regular dividends. Canadian banks keep themselves a great investment by maximizing profit from their customers. If you have a mortgage in Canada, that means those payments you make each month are being turned into dividends. Great for the investors, not so great for your pocketbook.
There's good news!
The Canadian mortgage industry is different than a lot of the world. The vast majority of mortgages are on 5 or less year terms. Which means every 3-5 years, the bank gets an opportunity to renew at the current market interest rates. The inverse of that is that every 3-5 years the borrower get a chance to find a better deal elsewhere. It's a chance to shop around, and baby, you're the prize!
Banks want your mortgage.
It just makes sense. If your mortgage is coming up for renewal, it means you've paid it down, on average your house is probably worth more, and the banks know you've paid it on time for the past x number of years. Your mortgage at renewal is a lot lower risk than it was when you were a new buyer, and it should be priced accordingly.
Unfortunately, most people just sign with their existing lender. The banks all know this. Which is why they often send renewal offers at higher rates than they're offering new borrowers. It can save you thousands (or sometimes tens of thousands) of dollars over your next term to shop around.
What's it cost to switch?
Fortunately, other banks will compete with your existing lender by often offering better rates for switches. They want your mortgage and offer lower rates to get them. Additionally, they will cover all the costs of switching to them. In most cases, the bank will cover the following costs:
- Appraisals (if required - rare)
- Title Insurance
- Legal fees
- Mortgage broker fees (banks cover our costs so you don't have to!)
That means it literally costs you nothing except for a bit of your time and maybe the cost of ink to print some documents all to get a better rate.
Seems like a good deal..
It is. It's a really good deal - looking into switching lenders at the end of each term of your mortgage makes all the sense in the world. Whether or not you use Tekamar (and we hope you join the thousands of clients who do! :) ) to help you find your next lender that will treat you the best, we really hope you do look into switching before you sign with your current bank. It could save you thousands and we'd rather that stay in your wallet than be turned into more bank dividends!