If your mortgage term is coming to an end and you have not finished paying off the loan yet, you are going to need to renew your mortgage for the remaining balance.
You know how important it is to make sure you’re being properly pre-approved for a mortgage before shopping for a home. But what about when you feel like you’re weighing your options between a few different lenders, or when your mortgage is coming up for renewal? All of a sudden, it can seem like there are a million different things to consider and not enough information available on each matter.
In this article, I’ll be taking you through the steps involved in renewing your mortgage and also giving you some advice on whether to stay with or switch from your current lender.
When is it time to renew your mortgage?
Your lender will send you a renewal statement approximately 90 days prior to the conclusion of your current mortgage term. The statement will include a breakdown of the outstanding balance, the interest rate, and how often payments are due on your loan. It will also included is a renewal form that you can sign and send back to your lender if you agree to accept their terms and renewal offer.
Don’t sign your current lender’s renewal agreement without first discussing your options with an experienced mortgage broker. You may be able to lower your interest rate and improve other terms by switching to a different mortgage lender.
Renewing early is always an option.
To get the best mortgage for your needs, shop early.
Borrowers are able to renew their mortgage contracts without incurring prepayment penalties, provided that they do so before the end of their contract period. This allows borrowers to lock in a desirable interest rate early, while not facing any additional prepayment fees.
Homeowners are likely to benefit from shopping around for mortgage products by comparing rates and terms with different lenders. Borrowers who want to take advantage of the best rates should call experienced mortgage broker and start exploring other options early—at least six months before their current mortgages are due for renewal.
Review your finances, goals, and mortgage needs.
You may have gotten a raise, lost your job, or retired since you first took out your mortgage. This may affect your finances and goals; for example, you may have more disposable income now that you’re retired or need to save more for your children’s education. You may also want to move to another home in the next few years due to changing family circumstances or because you’re moving to a different neighborhood.
Since you took out your mortgage, you’ve experienced several changes in your life. A major benefit of the mortgage renewal process is that it gives you the opportunity to adjust your current loan to fit with your changing circumstances. A mortgage broker can help you assess your finances and find a mortgage that works for you.
When your finances and future plans change, your mortgage needs may have to be adjusted. Because you will have to pay more interest on a higher monthly payment, consider prepayment options that allow you to make additional payments. If you think you’ll have your mortgage paid off by the next term, look at any prepayment charges and how variable rates could benefit you. If you’re making a move in the next few years, ensure that you won’t be facing big penalties for paying off your mortgage early. And finally, if you currently have a second or third mortgage on your property, a broker can refinance your first mortgage and combine it with the others to get one much more affordable first mortgage at a much lower interest rate.
If you’ve changed your financial situation, be sure to renegotiate your mortgage terms or shop around for a better mortgage product.
Should you stay with your current mortgage lender or switch?
Once your mortgage term ends, you are no longer obligated to stay with your current lender. You can find a new provider who will provide you with a mortgage that best meets your needs.
It is to your advantage to renegotiate the terms of your mortgage if you are happy with your current lender but would like a lower interest rate or better terms and conditions.
Lenders know that borrowers often don’t shop around for new lenders and that the borrower will agree to whatever terms the current lender offers. As a result, lenders won’t be giving you the most favorable renewal terms because they know they won’t have to work hard to keep your business.
A mortgage broker, who has access to many different lenders, may be able to find you a mortgage with lower rates and better terms than you would get from your current lender.
Advantages and disadvantages of switching lenders.
Switching to a new lender could save you major costs in the long run. Securing a lower interest rate can make up for any costs of switching lenders, and you may also benefit from more flexible terms and conditions with a new lender. Further, if you break your mortgage contract or make prepayments, you should be sure that your lender won’t charge you hefty penalties.
When you switch to a new lender, there may be some costs associated with the process. These may include registration, discharge, and reassignment fees. Your new lender may also request a property appraisal. While these costs could be high in the short term, they could be easily outweighed by the long-term savings.
When you switch lenders, you have to pass the stress test again. Most borrowers pass the test the second time around since many will have a higher income and a lower loan amount. If not, a mortgage broker could consolidate your debts into one low-interest loan, making interest payments much lower while also putting you in an improved position to qualify for a new mortgage.
The main point is that…
If your mortgage term is ending, you should try to renew or refinance your remaining loan balance at a better rate, with improved terms and conditions, or to take out a higher mortgage amount using the home equity you’ve built up in your home. Before accepting your lender’s renewal terms, reach out to a mortgage broker who can advise you on what other options are available to you with other lenders. Switching to another lender through a knowledgeable mortgage broker will oftentimes save you costs in both the short term and in the future, even if switching comes with a few costs.
Ask the Experts
When it’s time to renew your mortgage, get help from a knowledgeable broker at Orchid Financing. We will help you find the best mortgage deal possible with the most ideal terms and conditions available. Do not accept the first offer your lender makes- let our brokers renegotiate or find you a new mortgage for the best deal possible.
Contact Us to schedule a free consultation today!