Your mortgage renewal is coming up! How can you prepare?
Is your mortgage renewal coming up? This is a routine process for all homeowners, but it can still feel a bit scary. The good news is with some preparation, you can feel confident and ready to take on your renewal! Here’s what you need to know ahead of time, and how a broker is a crucial part of the process.
Renewal vs refinance
First of all, what’s the difference between a mortgage refinance and renewal? A refinance is when you renegotiate your current mortgage term in order to make adjustments to your mortgage. You might want to switch between a variable and fixed-rate product, access prepayment options, or shorten or lengthen your amortization period, for example. These are all common changes people can make, but if you are in the middle of your current term, you would need to refinance to do so. Refinancing pretty much creates a new mortgage loan with the purpose of accessing equity or increasing savings. Since you must break your existing terms to refinance, there are often penalties that come with this process unless you are at the end of your mortgage term. This doesn’t mean you cannot still complete a refinance, but you need to ensure it will be worth the cost.
A mortgage renewal, on the other hand, occurs when your mortgage term reaches its natural end. The length of a term can vary, but most terms are between two and five years. After this point, you have a chance to reevaluate your situation and product. If you find your mortgage is no longer meeting your needs, you can look into a new lender or product. A renewal provides the same opportunities as a refinance, but without any penalties.
Avoid renewing too early
If your mortgage renewal is on the horizon, you might receive an offer from your lender to renew your mortgage early. Many lenders provide borrowers with this option so they can get the renewal process out of the way. You may be tempted to take your lender up on their offer, but it’s best to wait! Right now, most homeowners are renewing at a higher interest rate than their current rate. Renewing early means you will start paying this higher rate sooner than you need to, which will cost you more. It’s generally best to wait until your mortgage reaches maturity before you renew, if you know you will be locking into a higher rate. This will save you a decent amount of money!
Be open to change
One of the scariest parts about renewing your mortgage is the fact that you will have to deal with change. Your mortgage rate will likely rise, and you will have to decide if you want to explore other lenders. You have probably gotten used to your current mortgage routine, so this can be intimidating. However, some change can be beneficial to you. It’s possible there is a lender or product out there that wasn’t available a few years ago, that would serve your needs better. Now is the time to explore your options and look around before committing to a lender and product. You don’t have to renew with your current lender if they are no longer the best fit! At the end of the day, you should protect your interests, which means finding the lender and product that fit you best.
Contact your mortgage broker for help
Of course, your mortgage renewal is made much easier when you have the help of a mortgage broker! It can be hard to know if you should stick with your current lender or look for something new. Your broker can work with you to determine whether there is a better option out there, and they can help connect you with the lenders who offer these products. In many cases, borrowers can only secure certain products if they use mortgage brokers, who have more access to lenders’ offerings than the general public. Don’t pass over your chance to secure the best product!
Your mortgage renewal can be a bit confusing and intimidating, and that’s perfectly normal. However, you should also feel confident that you can make the right decisions and find the best solution, and that means working with a broker. We are here to help you navigate the renewal process and secure the product that is a perfect fit for you.
If you have any questions about your mortgage, get in touch with me!