A lot of people cringe at mortgage renewal time and think it’s a complicated, awkward process. However, when armed with a bit of time to research and shop around, renewal time doesn’t have to be difficult at all, and it will help make future renewals a piece of cake.
When we arrange for our first mortgage, we agree to terms and rates that typically expire anywhere from 6 months to 5 or even 10 years. Sometimes there may be a drastic change in interest rates during that time, and other times there is very little or no change. However, mortgage renewal time is an important time to assess your current finances and ensure that your next mortgage is a truly great match. Renewals don’t have to be a headache, especially when you can save a lot of money on interest payments, consolidate debt, or pay down your mortgage more quickly.
How renewals work
Your lender or bank who holds your mortgage is responsible to notify you in writing within 30 days of its expiration, most often by means of a renewal form sent by mail. This renewal form or slip will outline your proposed new mortgage term and rate. Typically, all that’s required is for you to send it back signed and dated, and voilà, your mortgage has been renewed for another term. Easy, right? What many Canadians don’t know is that at renewal time, you can not only negotiate new mortgage terms and rates, you can also switch from your current bank, lender, or broker to another one if you so choose.
Take time & get prepared
A lot can change in our lives between one mortgage term to the next, such as a new baby, new marriage, new job (or no job), and so on. The mortgage you signed 5 years ago may not work for you anymore, so you wouldn’t want to renew without looking at options that will better suit your financial needs. However, when it comes to mortgage renewals, you can’t leave it until the last minute. The best time to start shopping around is 2-3 months before the renewal date. You can talk to a financial advisor, your current lender or other potential lenders, or do online research during this time. When you are doing this, be sure to ask questions related to:
- Payment frequency – how often your mortgage payments come out and what your options are for accelerated payments
- Mortgage payment amounts – if you increase your payments for example, you can pay off your mortgage sooner
- Debt-consolidation – can your mortgage ‘absorb’ a high-interest debt such as a credit card debt, so you pay less in overall interest payments?
- Potential penalties or fees involved
- Will you pass the stress test? The stress-test applies to new mortgages as well as renewals, so be prepared for this application process
Weighing in
The mortgage renewal slip that’s sent in the mail is very appealing for one main reason; it’s fast and straightforward, but it may not have your best interests at heart. By not taking action to review your renewal options, you could miss out on some serious cost-savings. Talking to a local mortgage broker is always a great place to start when it comes to mortgages and renewals, as brokers work with a variety of lenders to find the best rate. As an experienced, qualified mortgage broker, I sit down with my clients at renewal time and look at their current financial situation, and make sure I’ve sourced out a mortgage that works best, with no gimmicks, fees or sales tactics. Life is complicated enough; your mortgage shouldn’t be! If you’d like to apply for your first mortgage, or renew yours for the 1st or 10th time, that’s what I’m here for. Connect with me today at 705-230-1306 to set up your appointment and let’s get started.