The Rundown on Renewals – Mortgage 101 | May 9, 2023

On the latest edition of Mortgage 101, Clinton Wilkins and Todd Veinotte are talking all about renewals. The two chat about how to know when your mortgage is renewing, how Canadians can prepare ahead of time to speed up the process, and why lenders are extending amortizations.

LISTEN to the conversation on Spotify and Apple

Todd Veinotte 00:00
Alright, so here’s a question for you, as somebody gets, they’ve had a mortgage with Scotiabank or one of the big banks forever, let’s say 10, 15 years. And they may not even know when their mortgage is renewing, I would think that in some cases, they don’t even know.

How to know when your mortgage is renewing

Clinton Wilkins 00:15
I think sometimes people are surprised when they get the renewal packet in the mail from the bank. And I think in some cases, they never even hear from the branch and they just get the renewal package. Like, Oh, I thought my renewal was next year, I don’t know.

Todd Veinotte 00:26
Right. So if you do nothing with that, the bank will automatically renewed it at the rate in which they sent you in the mail.

Clinton Wilkins 00:31
They will automatically renew you either into a 6 or 12 month open or closed term, depending on what the lender is. And typically, those are very, very, very high, very high rates.

Todd Veinotte 00:41
That’s it. So it won’t be a five year renewal?

Clinton Wilkins 00:43
Typically, they will renew you either into a six month or 12 month open or closed. Some lenders are gracious enough to put you in an open, because that will give you lots of time. But the rate on an open right now are anywhere like 7-9%. ,

Todd Veinotte 00:55
Well, so is it to rely on or is it incumbent upon them, though, to let you know, in some way other than just that mail?

Clinton Wilkins 01:02
I think they legally need to let you know via the mail. But often, you know, they will call you or email you. The problem is that sometimes you change your telephone number or your email address, and they cannot get ahold of you any other way. Other than in the old fashioned snail mail. So I think being on top of knowing when your renewal is on your mortgage, very important. I can tell you, we certainly reach out to our clients via mail, email, SMS, telephone, we will literally send a carrier pigeon to you if we need to. But people still change their contact information. It would shock you it would shock you how often people change their telephone number and their email. Literally, there is no way for me to get ahold of you, unless you open your mail. And some people don’t open their mail either.

Todd Veinotte 01:51
So is there, I guess the only advantage would be to renew without any type of changes as if you didn’t have a job? Right?

Renewal is a good time to deal with credit challenges

Clinton Wilkins 02:00
I think you know, if you’ve had credit challenges, or if you’re unemployed, sometimes you can’t make a change. But even if you’ve had credit challenges, there’s so many lenders that will deal with people that have had challenge credit in the past, right. And sometimes that renewal, that’s the best time to deal with that, you know, do a refinance, get it cleaned up. But I think at renewal, it’s certainly time that you should at least review your situation. One, there is a wide range of where the pricing is in terms of rates, your existing lender likely is not going to be the lowest in the marketplace. And I’m not saying it’s all about price, but price plays a factor. And some lenders are as much as 1% higher than other lenders. So I think shopping around at least, calling an unbiased mortgage professional to be like, Okay, I got my renewal, this is what they’re offering me. I’m saying nine times out of 10, we can do better. Lenders are typically not the most aggressive on renewal offers. And you would think they would want to give you a very aggressive renewal to retain your business. But it is some friction to change your mortgage over. Like what I said, sometimes it takes five hours for me to do this between, you know, me updating your application, getting some documents, getting an approval, getting some documents signed. But that five hours sometimes can mean $5,000. Sometimes it can mean $20,000. It depends on how much the discount is going to be in terms of the rate. And sometimes I change people’s set up. Sometimes there’s home equity lines of credit involved, sometimes we are doing a refinance, sometimes we’re extending people’s amortization. Changes at maturity, are free, because you’re a free agent at that point. So typically making those changes, except for things like maybe an appraisal or registration cost, but you’re not paying a penalty to your existing lender to make a change.

Don’t go into renewals blindly

Clinton Wilkins 03:44
So it really is important to at least ask the question, just don’t go in blindly and renew. I see it because sometimes people call me after renewal to be like, I renewed with this lender, but I really don’t think I should have done this. What can we do? Well, we can do something, but it’s going to cost you a couple bucks to do. Right. And if you would have just called me, you know, four months prior six months prior, it would have been a lot easier to you know, help you. Some people avoid though.

Todd Veinotte 04:10
Yeah, a lot of people avoid and a lot of people are so traditional, like you said, because they’ve had I mean, I know my parents for goodness sakes, they were Scotiabank customers forever, that’s where they did all their banking.

Clinton Wilkins 04:20
And I’m sure I’ve said it on the show before Scotia Bank is a great partner of ours. So we’re not discounting anything with them. But you know, the bank lenders are overall, their appetite has lessened for mortgages the last three years because they’ve done just so much more volume than they thought they were going to. But not every lender has the same appetite. Some lenders have a much bigger appetite than others. So I think it’s just really important to at least ask the question.

Todd Veinotte 04:45
So somebody is thinking of that they’d like to potentially shop it around, which is a good reason, a good idea come to somebody like you. There’s a lot of things that they can do beforehand in order to expedite the process, speed things up, right?

Being prepared will speed up your renewal

Clinton Wilkins 04:57
Be prepared, have your documents together. So like have your income documents in the last two years together. Have your mortgage statement from your last year, so your 2022 annual mortgage statement and have your most recent property tax bill. So property tax bill, mortgage statement income documents in the last two years, you’re then good to go. It makes our job a lot easier.

Todd Veinotte 05:14
That’s all they need for that first meeting?

Clinton Wilkins 05:15
Yeah, that’s all they need. And then we’ll get a consent, we’ll give some recommendation, you know, we’ll ask about assets. We’ll ask about, you know, vehicles, you know, savings, investments, RRSPs, we get that information in there. But we don’t necessarily need confirmation in the document. We’re just asking you to be like, okay tell me about your assets.

Todd Veinotte 05:31
What about proof of income?

Clinton Wilkins 05:33
Well, if that’s your income documents in the last two years, so you know, if you’re employed, and you’ve been with the same employer, the last couple years, typically, we’ll ask for your most recent pay stub, and maybe the last two years of your T4s. If you’ve started a new job, maybe we’ll get a letter from that employer, and a job letter. If you’re self employed, we’ll get the last two years of your tax returns. You know, we’ll, everybody’s situation is a little bit different, but we send kind of like an initial list, and then pick your own adventure, depending on like what your situation is, right?

Success rates for approvals

Todd Veinotte 05:59
So do you feel confident that once you have somebody pre-approved that, with that document that you have, that that deal will get funded, that underwriting will get funded?

Clinton Wilkins 06:09
Yeah, I have an approval, like 99% of my files. Yeah, typically, we, you know, are opening to files to approval, you know, we include pre-approvals in there and everything like I’m, I’m funding, like 50% of the files that I open. And of the files that I submit, like 99 are approved, because I don’t submit the file unless I know it’s going to be approved. There’s always going to be nuances that I’m not aware of though. So that’s why there’s the 1%. But you know, I get a lot of my files approved because I do a lot of my due diligence up front, and I don’t even submit it if it’s not gonna work.

Todd Veinotte 06:41
So some people do it otherwise?

Clinton Wilkins 06:43
I think, I’m not saying other mortgage brokers do it a different way. But I think different lenders do it different ways. Like some lenders like to throw something at the wall and see if it’s gonna stick. I know what’s going to stick after 5000 files, I know what’s gonna stick. And we’re also doing enough volume that if I need someone to like really do me a solid and get a file approved that I need approved, chances are they’re gonna pull or they’re gonna pull through for us.

Extending amortizations to keep Canadians in their homes

Todd Veinotte 07:07
Anything moved on the stress test? Those goalposts?

Clinton Wilkins 07:10
No changes, but the interesting thing that we’re seeing reported to the federal government is, let’s just touch on this quickly, they’ve talked that they’re going to allow lenders to extend client’s amortizations. Potentially, to infinity. Is that going to happen or not? I’m not sure.

Todd Veinotte 07:26
What do you mean infinity? 40 years?

Clinton Wilkins 07:28
Potentially. There’s going to be – the federal government did release earlier that these lenders that have variable rate that have a fixed payment, we haven’t really talked about it this much in the show, that they’re gonna allow those lenders to bring it back from infinity, back to 40 years. It’s really important to think about this at renewal, because let’s say you had a very, very low variable rate and you had a mortgage payment that did not change, and you have not hit your trigger yet, you could be up to like a 99 year, or 100 year, 200 year amortization type thing. But when that mortgage comes up for renewal, the amortization, then maybe we need to come back into line. That can be really problematic for people. So I think the federal government and the banks, they’re working together to try to keep you know, Canadians in their home. We know homeownership is part of that Canadian dream. And I think, you know, seeking advice is important.

Todd Veinotte 08:16
Well, a lot of great information is always and we’ve come to a wrap up of another show. But before we wrap things up, how do people get a hold of you?

Clinton Wilkins 08:23
You know, check us out online at teamclinton.ca/radio. Lots of great information. We have hundreds and hundreds of blog posts on there. We’ve rates on there, you know, with lots of great information, you can also visit our our homeownership guide, you can you can click right in from our website, and you can download a copy or we’ll send it one to you in the mail. You can also check out our show, you know, we’re on social media. We’re on Spotify, we’re on Apple Music, and we’re on the CityNews website. So you can certainly listen to us any which way you want. And you can also read everything we have to say if you don’t want to hear us speaking anymore.

Todd Veinotte 08:56
Always a great pleasure, Clinton. Thank you so much.

Clinton Wilkins 08:58
Thanks for having me, Todd.

Todd Veinotte 08:59
That’s Clinton Wilkins and myself Todd Veinotte, Mortgage 101 your guide to homeownership. Thanks for listening.