Renewing your mortgage

When your current mortgage is getting close to its maturity date, you will need to re-negotiate.

This is the opportunity to decide:

• the new term length
• to negotiate the new mortgage interest rate
• to move your mortgage to a new lender.

Most lenders (federally regulated) are required to provide you with a new mortgage offer at least three weeks before your maturity date, if they are interested in renewing your mortgage.

They are not obligated to offer you a renewal should there be a change in your circumstances or a late payment history.

Statistics show that more than 50% of homeowners renew their mortgage with the current lender without negotiating the terms.

This doesn’t give the lenders much incentive to offer the best rates at renewal time. They are betting on the fact that you won’t shop around or won’t want to go through the hassle of applying for a mortgage with a new lender.

Signing the mortgage renewal offer without exploring other options is not in your best interest.

It’s easier to remain with your current lender as you don’t have to go through the hassle of providing new documents, etc., but you could find better rates and terms with another lender perhaps saving you thousands of dollars in interest costs.

Here are a few questions to ask yourself before you sign that mortgage renewal offer.

Have you explored all your options?

We can look for opportunities that could better meet your needs right now. 

Are you comfortable with your payments?

If you’ve been feeling financially strapped each month making your mortgage payments, this could be the time to reduce them to a more easily managed level.

On the other hand, if you’re earning more, why not pay down your mortgage faster and save thousands of dollars in interest over time? 

Do you need cash flow for other things?

Your priorities may have shifted since you first bought your home, and your cash flow needs can shift too. Things like paying for a child’s university education, planning a career change, or a major purchase such as a vacation property may call for spending money on things other than your home.

You may be able to refinance your mortgage to take this into account. 

Can you handle fluctuating rates?

Some homeowners are nervous about any hikes in interest rates, while others are comfortable to go with the flow. Rates are tough to predict. It’s best to base your decision on your personal situation, not what you read in the news, and tailor your mortgage renewal around your needs.

We can help you decide whether to opt for fixed or variable rates. 

Will you sell soon?

If so you might want to consider a shorter-term mortgage or one that has flexible terms so you’re not penalized if you sell your house before the mortgage comes due. Not all mortgages can be moved to a new property.

Are you thinking about a major renovation?

Before you renew, look at all your financing options, which may include getting an additional line of credit or keeping your monthly mortgage payments low so you have money on hand to finance the renovations.

When do you want to be mortgage free?

If you’re planning extended time away from work or perhaps an early retirement, it may make sense to pay down your mortgage sooner rather than later.

While increasing your payments will raise your monthly costs now, you’ll ultimately save on interest in the long term and can prepare for that fabulous, mortgage-free lifestyle. 

Could you use your home equity to fulfil other goals?

Refinancing a mortgage can be one way to free up cash you need for other things, which could even include buying another property. Mortgage renewal time is an ideal occasion to review all your options. 

Are you getting the best rates and terms? In a competitive mortgage environment, your good credit history can make refinancing work to your advantage.

We analyze mortgage markets daily to ensure you don’t miss any money-saving opportunities.

Questions about your mortgage renewal? Please give me a call at 1-888-561-2679 or email [email protected]

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.