Time flies when you’re…working hard to pay off your mortgage. Before you know it, your mortgage term is coming to an end, and it’s time to renew. Most of us go through mortgage renewals several times in our lifetime; sometimes the interest rates are higher than our current rate, and other times we get lucky and they go down. Whatever the case, renewal time means your time is needed to have another look at your financial needs and goals, and secure the best options possible.
How the renewal process works
You will get a renewal statement before your existing term ends (legally it has to be sent with at least 21 days’ notice – which isn’t much time). This tells you how much is left on the principal loan, and all the features of your contract such as the interest rate, payment details, and term. You have the option to pay off your mortgage fully, or renew it for another term. It’s very tempting just to sign it out of convenience, but it’s a common mistake to do so without going over it carefully, or finding better options and rates. You can also switch from your current bank, lender, or broker at renewal time – usually without penalty. You have more control over this entire process than you may have realized, so let’s have a look at a few tips to help you along the way.
Review your mortgage needs
A few months before your mortgage is up for renewal is when you should really start doing some research and get down to business. There’s not quite as much paperwork as the initial mortgage on your home, but it is still a legal document that impacts your finances and future. Here is a helpful list from The Government of Canada’s Financial Consumer Agency, which are great questions to consider when renewing your mortgage:
- Can you increase your mortgage payment amounts so you can pay off your mortgage sooner and pay less interest?
- Can you change your payment frequency? For example, if you switch from monthly to accelerated bi-weekly payments, you can pay off your mortgage more quickly.
- Are you satisfied with the services offered by your current lender or broker?
- Do you want to consolidate any other debts (especially those that have higher interest rates)?
Many people aren’t aware that renewal time is a great time to assess their total financial situation – not just find a new interest rate. As an experienced broker, I go over your current financial situation at renewal time, and review the various mortgage options you have, so that you are clear on all the details and there are no surprises. We have enough surprises in the mortgage world with varying interest rates; we don’t need anymore!
If you snooze…
We all know what happens when we procrastinate; it rarely ends well. The same goes for mortgage renewals. If you don’t take any action, your mortgage may be automatically renewed for another term. This means that you could have missed out on a better interest rate (and other conditions), and you will be stuck until the term is up – unless you are willing to pay some big penalties. If you shop around for better rates, try to get a head-start. It’s always good to remind people that the bank is not your only choice to get a mortgage. If you haven’t yet worked with a mortgage broker, it really is the best place to begin – because brokers already source the lowest rate with multiple lenders, and do much of the legwork for you. You need a mortgage with terms and conditions that best suit your current situation. For example, this is the time to check if your fixed-rate mortgage or variable-rate mortgage is working for you, or if consolidating other loans or credit cards would be a good idea. Think of renewal time as a positive time, because you get to stop, assess, explore, and move forward with a plan of action that meets your present needs. Many people fear renewals because of their experiences with awkward negotiations with the big banks or lenders, or because they didn’t have the time or the right information to secure a better deal. With a broker, however, there is no stressful negotiating, because our first offer is usually your best offer. As an experienced broker, I work closely with my clients at renewal time; there is no pressure or any sales tactics to interfere with this important process, and I don’t charge you any fees. If you’re looking for your first mortgage, or your renewal date is around the corner, please give me a call at 705-230-1306. I’m here to answer your questions and make the mortgage process as stress-free as possible.