If your mortgage is soon coming up for renewal, you’ll want to do your research well in advance to make sure that you get the best rates along with the best terms from your lender. One of the worst mistakes home owners in the Barrie and surrounding area tend to make is to let their mortgage auto-renew. Much of the time the auto-renew is easier as you don’t have to set up an appointment and review a stack of paperwork while trying to understand what it is exactly that you are looking at. However, the savings you can reap if you do take the time to review every detail can mean a few thousand in your pocket instead of in your lenders. So what exactly should be reviewed and why? Let’s take a look…
Should you renew or refinance?
As you pay down your mortgage you build up equity in your home, and as those dollars add up, they can be quite helpful if you’re trying to pay down other debts. Which is why when your mortgage comes up for renewal taking a look at just how much debt you have along with the amount of equity you have built up in your home, could give you the opportunity to use that equity to pay off your credit cards. Don’t forget though, if you do use your home equity to pay down debt you still have to pay back the money to the equity of your home. For example, if your home is valued at $340,000 and over the course of time you have built up $40,000 in home equity, and you have a credit card with a balance of $25,000 owing, you could take $25,000 of the $40,000 of equity in your home to pay off your credit cards completely. However, when you do so, the equity in your home drops in relation to the amount of money you have borrowed and therefore you would refinance your mortgage upon renewal for the amount you owe on your home in addition to the amount you’ve borrowed. The benefit of doing this is that instead of borrowing from your credit card company at a rate of 19.9%, you would only pay the interest rate of your mortgage which could be as low as 4.2%.
Is it time to change lenders?
When a home owner is seeking a mortgage for their new dream home, often their first stop to learn about financing is at their bank. One of the reasons being that as you have been a long time customer of theirs, they will be likely to offer you the best rate, however, this is actually a myth. Much of the time your bank has set rates that they can offer and there is little they can do to sway the lenders to give you a lower rate or any funding at all depending on your personal credit rating and outstanding debt. When it comes time for renewal, your renewal rate negotiation is much the same as your original mortgage experience. Working with a mortgage broker on the other hand, can give you more flexibility and often better rates as they have a vast number of lenders that they can work with in comparison.
Renewing your mortgage with a little extra for renovations
If you have renovations that you are wanting to make to your home, you might not know that you have the option of renewing your mortgage with an increase in amount to cover the cost of the renovations you would like to make. Think of it as the bank giving you a loan without slamming you with another interest rate and monthly payment. This type of mortgage is called a refinance plus improvements mortgage. With a little information from you in regards to the renovations you would like to make, your mortgage broker can not only negotiate the best rate for your mortgage renewal, but they can also help you to secure the extra funds for that new kitchen you’ve been wanting too.
Taking the time to shop around when it comes to renewing your mortgage, can mean saving thousands over time and having the advice of a mortgage broker to negotiate those rates for you takes the stress away knowing that you have someone in your corner. If your mortgage is coming up for renewal soon and you would like to take a look at what options and opportunities you could be taking advantage of, give me a call at 705-315-0516. I’m always here to help you secure the financing you need with you and your families dreams in mind.