Why Renewing Your Mortgage The Easy Way May Not Be The Smartest Way

You’ve received your mortgage renewal notice from your bank or lender, and the rate is higher than you’d prefer. While simply signing and returning the document is the easiest option when it comes to renewing your mortgage, it might not be the best one. You need to stop and ask yourself “Are you potentially overlooking better mortgage solutions?”

When your mortgage comes up for renewal, it presents an opportunity to review your financial situation and explore options that could better align with your current needs and goals. Understanding the available choices can help you make informed decisions that could save you money or provide access to equity you could use to pay for renovations you’ve been wanting to make with the goal of increasing the value of your home in mind.

Understanding Your Mortgage Renewal Notice

Lenders are required to send a renewal notice at least 21 days before your mortgage term ends. This notice includes the new interest rate, term options, and payment schedule. However, don’t feel pressured to accept these terms without exploring other possibilities.

Taking The Easy Route: Renegotiate With Your Current Lender

Staying with your current lender can be convenient and might come with several advantages. One key benefit is that you generally don’t need to go through the mortgage approval process again, eliminating the need for requalification. And, staying with your lender avoids any legal and administrative fees associated with switching your mortgage, potentially saving you money as well. But, you don’t have to accept their first offer. If you have a good payment history, you might be able to negotiate a better rate or more favourable terms. The starting point is simply asking them to do better and seeing what they come back with.

It’s Worth Doing The Research On Mortgage Lenders

Switching lenders can often provide better terms or lower rates, but it requires some effort. You can research and compare mortgage rates and terms from different lenders using tools like mortgage comparison websites to find the best offers. Or, you can work with a mortgage broker who will often have access to alternative lenders and can tell you what is available at that moment. A mortgage broker can really save you time in the process. You can then use these potential offers as leverage to negotiate better terms with your current lender.

It’s also important to understand the potential costs involved, such as appraisal fees, legal fees, and possible penalties for breaking your current mortgage if you do decide to switch. Some new lenders might offer to cover these costs in order to gain your business. Due to recent changes by the government, switching lenders does not mean you will have to go through another mortgage stress test, which makes changing lenders much easier but, you still have to do the paperwork that comes along with it.

Exploring Other Options – Refinancing Your Mortgage

Refinancing involves paying off your current mortgage and replacing it with a new one, which can be beneficial in several ways. If current interest rates are lower than your existing rate, refinancing could reduce your monthly payments. Additionally, if your home has increased in value, refinancing can allow you to access the equity for renovations, investments, or other needs. Adjusting the term length or switching from a variable to a fixed rate (or vice versa) can also align your mortgage with your financial goals. Working with a mortgage broker can help you understand the refinancing process, assist you in finding the best rates, and advise you on which to choose so you get the right terms for your specific situation.

Be Aware Of The Different Mortgage Types And Options

Several mortgage products might better suit your financial situation. Fixed-rate mortgages offer stable payments with a constant interest rate over the term, providing predictability and security. If you expect some rates to go up or remain stable, this is the cheaper way to go. Variable-rate mortgages , on the other hand, have rates that fluctuate with market conditions, which can lead to lower rates but also involve more risk. If you think that mortgage rates are going to drop, this may be the right alternative. A hybrid mortgage combines fixed and variable rates, offering a balance between stability and potential savings.

When renewing your mortgage, if you’re struggling to make your monthly payments, you may want to consider increasing the length of your amortization to lower your payments. Conversely, if your income is higher than anticipated, you could shorten your mortgage loan to pay it off faster. Additionally, if you need extra funds for home renovations, a Home Equity Line of Credit (HELOC) allows you to borrow against your home’s equity, providing you with the necessary resources.

Whatever You Decide, Don’t Wait Until The Last Minute To Review Your Mortgage Renewal

Even before you’ve received your renewal notice from your current lender, you should start exploring your options. Give yourself at least four months before your mortgage term ends so you have ample time to research, negotiate, and complete the necessary paperwork. Work with a mortgage broker and financial advisor to assess your budgets going forward to find the right mortgage options to fit your lifestyle.

Seek Professional Advice To Find The Best Choice For You

Remember that your current bank or lender isn’t the only place to go when your mortgage is up for renewal. If you’re not happy with their rates or their customer service, other options are out there. Mortgage brokers can provide valuable insights and help you find the best rates and terms tailored to your situation. Financial advisors can also offer guidance on how refinancing or accessing equity might impact your overall financial plan. So having more than one advisor on your side is a smart decision.

If Your Mortgage Renewal Is Coming Up Soon, Contact Me And We’ll Ensure You Get The Best Rate

Renewing your mortgage is more than just signing on the dotted line. It’s an opportunity to potentially save money, access equity, and align your mortgage with your current financial goals. By understanding your options and taking a proactive approach, you can make informed decisions that benefit you in the long term.

As an experienced mortgage broker and financial advisor, I will work with you to map out the next 5 years to find the most advantageous mortgage options for you given the goals you want to achieve. Give me a call at 705-315-0516, or book a consultation online now, and let’s make sure you get the upper hand in your mortgage renewal negotiation.