Is your current mortgage term coming to an end? If you still owe money on the mortgage, you will need to renew it. The process is easier when you know the steps to follow.
Plan well ahead: Begin your renewal process at least 90 days before your current mortgage term expires. This gives you ample time to research options and compare rates.
Review your mortgage renewal statement:
A federally regulated lender like a bank must provide you with a mortgage renewal statement at least 21 days before the term ends. The statement must contain the following information:
- the balance or remaining principal at the renewal date
- the interest rate
- the payment frequency
- the term
- any charges or fees that apply
The renewal statement must also specify that the interest rate will not increase until your renewal date. Beware that the renewal of your mortgage term may be automatic. If your lender plans on automatically renewing your mortgage, it must say so in the renewal statement.
2. Review your mortgage needs
Make sure you have the right mortgage product. For example, some mortgages allow flexible payments, which can help you pay off your mortgage sooner. Look for features like being able to:
- increase payments
- change payment frequency
- make additional payments
3. Shop around for multiple lenders/mortgage agents/mortgage brokers
Utilize online mortgage calculators to estimate potential savings based on different interest rates and amortization periods. You do not have to accept the interest rate in your renewal letter. And, you don’t have to renew your mortgage with the same lender. Start shopping around before your mortgage term ends. Contact various lenders and mortgage brokers to see what interest rates and mortgage options they can offer. Tell your lender about the offers from other lenders.
Consider Your Options wisely
- Fixed vs. Variable: Evaluate whether a fixed or variable interest rate is more suitable for your financial goals and risk tolerance. Fixed rates offer stability, while variable rates can be lower initially but may fluctuate over time.
- Amortization Period: Explore the possibility of extending your amortization period to lower your monthly payments but be aware of the long-term implications for interest costs.
- Prepayment Options: Understand your lender's prepayment privileges. Some lenders may allow you to make lump-sum payments or accelerate your mortgage without penalties.
- Negotiation: Don't be afraid to negotiate with your lender, especially if you have a strong credit history and a history of on-time payments. Leverage your Competitive offers from other lenders as leverage to negotiate a better deal with your current lender in favor of yourself.
- Evaluate Refinancing: If you're looking for a significant change in your mortgage terms (e.g., switching to a different lender, consolidating debt), refinancing might be an option. However, be aware of the associated costs, such as appraisal fees and legal fees.
Review Your Insurance:
- Mortgage Life Insurance: Assess whether your mortgage life insurance coverage is still necessary and if there are more affordable options available.
- Property Insurance: Ensure your property insurance coverage is adequate and that you're getting the best possible rate.
By following these tips, you can make informed decisions about your mortgage renewal and potentially secure a more favorable deal that aligns with your financial goals.
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