Mortgage Shopping: It Can Save You Thousands
But Don’t Forget the Insurance
Recently I had a client who was renewing their mortgage on a commercial property that she owned. She accepted the bank’s terms thinking that as a long-time customer, they would give her the best rate. She quickly learned that a better interest rate was available with a competing bank and the difference would save her $10,000 in interest payments over 5 years. Luckily she had not officially agreed to the initial rate and was able to use the competing offer to negotiate with her bank and obtain an even lower interest rate, saving her almost $13,000 in interest payments.
The above story is not unique. Whenever you need a mortgage, shop it out! A difference of half a percentage point on a $300,000 mortgage results in savings of $7,000 in interest payments over 5 years. Easy money in your pocket.
While reviewing your mortgage make sure to review your insurance as well. Financial institutions often offer you life, critical illness, and disability insurance to cover the payments. The premium is typically higher than what you can get through an insurance broker, but there is one extremely important benefit of getting individual coverage: portability. If you buy insurance through the lender and you become uninsurable, it is unlikely that you will be able to renegotiate your mortgage as easily. You will have to stay with the same institution to maintain the insurance coverage. Change the institution or change the mortgage principal and the insurance coverage is void and good health is required to requalify.
With individual insurance, the premiums are often cheaper and you own and control the policy giving you the flexibility to change lenders and negotiate terms.
Two valuable lessons that can save you thousands of dollars.
If you need guidance on your mortgage renewal, contact your trusted ZIW advisor!