A mortgage is one of the biggest expenses a Canadian will take on during their lifetime, yet close to half wait less than 30 days before their home’s closing date to secure a rate, according to a recent Angus Reid poll.
The poll, commissioned by ING Direct, found that 40% of Canadian mortgage holders waited only 30 days or less in advance of the home’s closing, while another 27% waited nearly two months.This last-minute behaviour indicates that many Canadians are not taking advantage of the savings inherent in securing rate guarantees, which are available as early as 90 to 120 days before a home closes.
Analysis shows that those who used the full rate guarantee period of 120 days saved 0.18% on average or about $1,800 over five years. These savings are based on a $200,000 mortgage with a 25-year amortization, five-year fixed term at 6.96% (average posted five-year fixed rate over last 10 years) and paid monthly. Taking full advantage of a rate guarantee period makes financial sense for both new homebuyers and those with existing mortgages. In fact, those with existing mortgages are the ones who could benefit most from a rate hold.
The survey found that of the 64% of Canadians whose mortgages have come up for renewal, over one quarter (27%) indicated they let their mortgage automatically renew. Not negotiating a better rate than what is offered in a renewal letter by the current lender, or looking to alternate lenders for the best rate available in the market, means Canadians could be missing out on the opportunity to get a better rate.
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