When your mortgage term is up, you have three options: you can renew with your existing lender at the rates they are offering for a new term and the remaining amortization; transfer your mortgage to a new lender usually available at no costs to take advantage of a better interest rate; or refinance it to access equity to renovate, pay off higher-rate debts, or improve cash flow. If you’re not sure which option is best for you, we outline everything you need to know about your upcoming mortgage renewal and show you how to make the best decision for your needs now and for the future.
What Happens When Your Term Expires?
If your term is coming to an end, your current mortgage provider will send you a renewal slip in the mail that you simply can sign and send back. But here’s the thing, banks won’t always offer you their lowest rates available, they will make it easy with a simple checkbox, but you could be missing out on lower interest rates saving you interest and taking years off your mortgage.
That’s why you should always take the time to find out if your current mortgage holder is still the best option for your needs and providing you the best option to meet your needs. A mortgage broker can advise on your options whether that is to stay and renew with your lender, transfer to a new lender, or refinance.
What You Should Really Do At Renewal Time?
Contact a mortgage broker about six months before your term expires. They will review your current mortgage and your financial goals to determine what product on the market today would be the best for your needs. Unlike the mortgage originator you use at the bank, a licensed mortgage agent doesn’t only work with one lender. Instead, they have access to a wide range of lenders on the market. They can quickly and easily uncover what the other lenders are offering and find products on the market that are better suited for you.
Where A Renewal Might Fall Short
Your life is constantly changing. Over the term of your mortgage, you could’ve had a baby, got a new job, lost a job, or started to save for your children’s education. These changes can impact your financial goals now and in the future. If you sign a renewal slip without taking these changes into consideration, you could be losing out on some of the benefits that a new mortgage product could provide. For instance, your new job might make it possible to pay back a big chunk of your mortgage, saving you thousands in interest fees. But if your current mortgage has strict prepayment penalties, it will cost you a premium to make early payments. A refinance, however, would allow you to choose a mortgage with a lump sum or accelerated prepayment option. A refinance could also allow you to take out some of the equity in your home to help pay for your child’s education, a renovation or to pump up your RRSPs.
As you can see, it’s worth taking the time to explore all your options before you sign the renewal slip. When your mortgage is coming up for renewal, contact us at the Mortgage Advisors and we’ll make sure that your current product is the best one for your current and future financial goals.