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My Mortgage is Up For Renewal, Now What?

My Mortgage is Up For Renewal, Now What?

Sign on wooden stakes in the grass that says renew

When you buy your first home, securing your mortgage and wading through all the paperwork that comes along with it seemed overwhelming. Then, you got the keys, moved in, and forgot all about your mortgage, aside from paying your mortgage payments that is. That mortgage contract you signed was good for a few years but, now it’s up for renewal leaving you with a few questions. To help you navigate your first mortgage renewal, just like I walked you through your first mortgage application, here are a few common questions you likely will want to know the answers to ahead of renewing your mortgage in 2020.

What happens if I don’t do anything?

If your mortgage is up for renewal you should get a notice in the mail from your current lender letting you know. That notice should give you the details of the mortgage terms and the renewal rate that they have offered you. Typically they ask that you sign and send it back to them to create a paper trail on the contract but, if you don’t do anything, most lenders will automatically renew your mortgage and send you back a notice saying your mortgage has been renewed. Although you can let you mortgage renew like this, you’re missing a big opportunity to negotiate a better interest rate which could save you thousands long term.

What happens if I want to change lenders?

If you want to change lenders you can absolutely do that. In fact, your renewal period is the perfect time to seek out new lenders, better terms, and lower interest rates. Especially if you have a better credit rating or higher income than you did previously. Be sure to contact your mortgage broker to start looking at mortgage options and rates about 60 days in advance of your mortgage renewal to make sure you don’t have to rush through the process. You can start negotiating rates as early as 120 days in advance if you really want to get a jump on the process but, 60 days is typically ample time.

What happens if I have a better credit rating? Can I get a better mortgage rate?

If you have a better credit rating than you did previously when you secured your first mortgage you’ll want to let your current lender know while negotiating a better rate or you can change mortgage lenders and have your mortgage broker submit a new application to different lenders. Negotiating the best rates and options on your behalf is after all what they are there for and, you don’t pay them anything to do so. Talk about a win-win.

What happens if I don’t have the same job or salary as I did before?

If you don’t have the same job but, you make a similar income that won’t change anything really. If you’ve changed jobs and make a dramatically lower salary that’s where things get a little trickier. If your mortgage is in good standing with your current lender, it’s smart to stay with that lender and renew for the rate they offer to avoid your interest rates going up because of the change in income.

What if I was laid off because of COVID-19? Will I still be able to get the mortgage I need?

If you’ve been laid off recently because of COVID-19, and your mortgage is up for renewal, you may be able to renew with your current lender if your mortgage is in good standing. Some lenders won’t renew your mortgage though if you have been laid off as you no longer have the income to support the payments from their perspective. However, that’s not the end of the road. If this is something you run into, contact your mortgage broker and have them look into alternate mortgage options for you. Most mortgages secured are held by “A” rated home owners. That rating basically just means you have the income to support it and you’re not a high risk to the lender. When you’re unemployed you might be classified as a “B” rated home owner. If that’s the case, you can still get a mortgage, it just means you’ll likely pay a higher than usual interest rate. Beyond that you can look into private lenders if you’re really in a pinch but looking at all your financial options with an experienced mortgage broker will help you make the best decision with the least long-term impact on your financial goals. And, just because you can secure a 5 year term mortgage as a “B” rated home owner doesn’t mean it makes the most sense to do so because it’s likely that you’ll gain employment in a few months, making a shorter 2 year term a better option for you financially. With a shorter term, you’ll be able to renegotiate sooner to get that interest rate lowered when the time comes assuming you’re in a better financial position at that point.

Throughout your life as a home owner, things change. You might get a new job, need a bigger house, experience separation, divorce, lay off, or inheritance. That’s why it’s important to work with not just a great mortgage broker but a financial partner like myself, Darren Robinson. Balancing out your finances, working towards long-term financial goals, and making sure you have the life insurance you need in place to prevent financial pitfalls throughout your life is better navigated with a trusted partner by your side. If you’re wondering which path to take when it comes to your mortgage renewal or any other financial matter in your life right now, give me a call at 705-315-0516, and let’s tackle that decision together.

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