The saga of renewing our mortgage is over. Thank goodness. This is one of the less fun parts of farm ownership.

But, it’s important.

It’s because of careful financial planning that Matt and I were able to buy the farm in the first place. We stay on top of our finances and prioritize our mortgage to ensure we’re able to maintain the lifestyle that’s so important to us.

Today I wanted to share a bit of our experience renewing our mortgage. Hopefully, there are a few lessons in here that might help others as well.

Start early

We were eligible to renew as of six months before the end of our mortgage term. It’s important to take advantage of this long lead time and not wait until the last minute.

Matt was watching the interest rate forecasts and suspected that the rates were going to go up, so he wanted to lock in as soon as possible. We also knew we would likely need time to negotiate the best deal.

Give yourself as much time as you can so that you’re not scrambling–and potentially paying more than you need to–at the end. I’ve also learned that rates are often lowest in the summer, so if you can work that into your timing you could have an advantage.

Organize your records

To renew, our lender needed up-to-date paperwork for our property taxes and insurance.

The credit union that holds our mortgage had gone through a merger in the last five years and changed its name as a result. We had to update our insurance to reflect their new name, which took time (much more time than it should have, but that’s just the one of the joys of home ownership).

Most cities will issue a tax certificate which shows the status of your property tax payments. Our city does this for a fee of about $60. For our credit union, our most recent tax bill showing it had been paid was sufficient.

If you’re going to transfer your mortgage to a different lender, you’ll likely need additional paperwork regarding your house, employment and income tax.

Negotiate for yourself

At our first renewal meeting at the credit union, they had little cards all around the office promoting a 2.69% interest rate. And then sitting in the meeting they offered us 2.99%. Ummm… what?

Even Baxter agreed that didn’t sound right.

It turned out that the 2.69% was for new customers only. Matt, who knew I was about to lose my mind, was very careful not to look at me. Why do you not reward loyal, reliable customers?

After a conversation, our agent offered to put in a request to “head office” for 2.79%. I still wasn’t happy, but it was better than nothing.

Guess what rate was approved. 2.89%.

Matt’s reaction was, “Well, it’s better than what we’re paying now. And what if rates go up?”

I said, “Give me a week.”

I booked appointments at two other banks, gathered all of our paperwork (including extra paperwork about our personal financial situation) and went to work. In the end, I managed to secure two offers at 2.64%.

Because these companies weren’t familiar with the farm, we would have to go through an appraisal again. But both banks waived the fee.

Matt shared the emails with the new offers with the credit union—the written evidence was important. And… they matched the rate. Thank goodness.

Biggest lesson from this renewal process. Do not accept the first offer you receive. Work with your current lender. Engage a mortgage broker. Shop around to other lenders. Do everything you can to get the best deal for yourself.

While a quarter of a percent may not seem like a huge decrease, on hundreds of thousands of dollars over five years (or longer) every percent makes a difference.

Read your mortgage policy

Before you sign anything, read the paperwork—even the dense, legalese, policy parts. Understand what is expected of you and what flexibility exists for payments.

For Matt and me, being able to adjust our payments if needed and being able to make lump sum payments against the principle are important.

There have been some changes to our credit union’s policies, so it was important to understand how that would impact how we usually manage our mortgage.

Pay attention to your payments

Thanks to our lower interest rate, our new payments are much lower than they were before–or they could be. Matt and I have chosen to keep our payments at the same level, which means we’re putting more towards the principle than before–$63.80 every single week. That’s more than $3,300 extra that we’re taking off the principle every year, which means the farm will be completely ours that much sooner.

Consider your situation

Five years is a long time. Things may have changed since you first signed your mortgage. When renewing your mortgage think about where you’re at now in your life as well as what’s ahead and what you need.

Maybe interest rate isn’t most important to you. Maybe you want to change your payment amounts or timing. Maybe you’re ready to renovate and want to set aside money for that. Over the last five years, Matt and I have changed jobs, renovated, bought a new car. And who knows what’s ahead.

We’re confident that we’ve done our best to set up the new mortgage in the way that works the best for us and that we have the flexibility to adjust if we need to.

Anyone else have a mortgage story to share? What are your tips for negotiating with a financial institution? How do you balance lifestyle and finances?

Anyone have any tips for renewing a mortgage?

Most of the time, I feel like Matt and I have always lived here at the farm. However, we’re actually just coming up on five years–a fact that has been brought home to us ’cause our mortgage is almost at the end of its term, and it’s time to renew.

We’ve never gone through a mortgage renewal before (you may recall we were able to pay our first house off in 4 and a half years), so we’re a little uncertain about the process.

You also might remember that getting the mortgage the first time around was complicated because a farm is outside of the norm when it comes to financing.

I’m looking for any and all tips you have for getting the best deal during a mortgage renewal.

Interest rate is our most important consideration. We are working hard to pay off the farm quickly, so we want to pay as little interest as possible.

We’ve met with the credit union that currently holds our mortgage and with a bank. I have one more meeting lined up next week with a different bank. All of the rates we’ve been offered so far are lower than we’re currently paying, which is great, but I don’t feel like I’ve found the best deal yet.

Any advice to help us through our mortgage renewal?

The first installment for our 2013 property taxes are due this week. I realize this topic will not apply to some readers, but I decided to write this post anyways, as our experience may be helpful to some of you.

Property taxes on a rural property can be a bit complicated. However, it’s worth it to seek out rebate programs, as the savings can be significant.

For us, the farm is divided into three parcels: residential, agricultural and conservation.

The residential section is exactly the same as most people’s property taxes. It includes the house and one acre of land immediately around it. These are taxed at the regular residential rate.

The agricultural section of the property is the fields. These are classified under the farm property class and are taxed at 25% of the residential rate.

The conservation section of the property is the woods and marshland. For us, this adds up to 42 acres that is classified as “provincially significant wetland.” Under the Conservation Land Tax Incentive Program, these acres are tax exempt as incentive to maintain them as natural areas.

None of these tax rebate programs are automatic, as we discovered last year. Previous owners had let the rebates lapse, and between 2010 and 2011, the property taxes nearly doubled. The whole 129 acres was being taxed at the residential rate–ouch.

The residential classification was still in place when we took possession of the farm last March. We went to work right away to apply for the rebates that were available to us. What we learned is there is no single point of contact for farm property taxes.

The Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) handles applications for the Farm Property Class Tax Rate. Operations such as tree farms, animal farms, greenhouse operations or crop farms like ours count under this class of property. The farm must simply generate at least $7,000 of income a year. The most important part of the application is the Farm Business Registration Number. Since we do not farm the property ourselves, the farmer who rents our fields has to complete this portion of our application and supply his registration number.

The Ministry of Natural Resources (MNR) manages the Conservation Land Tax Incentive Program. Most of our property is restricted under the local conservation authority. However, this does not automatically qualify us for the CLTIP. The Ministry has to deem a property—or a section of it—as provincially significant. Fortunately, our property was already in the MNR’s system, so we just had to apply for the rebate.

We also went through our local municipality for a few other adjustments specific to the house itself: their records showed a mobile home on the property and a working indoor pool, both of which did not exist and which impacted the value of our house. After the “demolition” of the mobile home and the pool, our taxes decreased by a whopping $257.56–hey, I’ll take whatever I can get.

The Municipal Property Assessment Corporation (MPAC) is the overarching organization in Ontario that manages everyone’s property taxes. Approvals from the city, OMAFRA and MNR flowed through to MPAC, which pulled all of the information together, determined our tax rate and notified the city of what we should be billed.

The flow of applications, approvals and adjustments is very, very slow. Our applications went to the various organizations last spring. I followed up monthly by phone to make sure all of our applications were wending their way through the system and no information was missing.

Some of the approvals came through in the summer. However, none of the adjustments were applied at the city level until the fall. We paid three installments at the full residential rate—ouch again. However, by the end of the year when the reclassifications finally came through, we had a huge surplus on our account—so much so that we didn’t have to pay our last installment and the city still sent us a cheque at the end of the year.

Now heading into the 2013 tax year, all of the rebates are in place, and the quarterly tax bills are very manageable. In fact, the amount of property tax that we’re going to pay this year is equivalent to what we paid when we were living in our little house in the city.