A Step-by-Step Guide to Renewing Your Mortgage
posted in Mortgage News
When you renew your mortgage, it gives you a great chance to think carefully about whether your needs have changed throughout your current mortgage term. It may be that your budget has altered, you plan to move in the near future or that you’re no longer satisfied with the service you receive from your existing lender.
Factors such as these can all have a significant impact on your renewal decision, and help you construct a new set of criteria for your mortgage.
If it’s time for you to renew your mortgage, here is a brief guide to help you make the best decision for your circumstances:
Consider whether your monthly budget has increased
Paying off your mortgage sooner and saving money on interest might be possible if you choose to increase your monthly payments or change their frequency, but you must consider any terms of renewal carefully before agreeing to them.
Think about exploring different interest rates
Better rates may be out there when you renew, and a local mortgage broker can help you find one.
Ask yourself whether you could you make a lump sum payment?
This may be possible during the renewal process, depending on your lender.
Find out if extra payments are a possibility during your new term
Paying off your mortgage faster with extra payments may be an option, but check whether this will incur any penalties before agreeing to anything.
Do you plan to move during your new term?
If so, you may be able to transfer your mortgage with a portable or assumable mortgage.
Might you be able to pay off your mortgage during your new term?
Doing so could save you thousands in interest, but it’s vital that you find out about prepayment penalties that might apply before signing anything.
Plan for your renewal at least 4 months before its due
Most lenders will allow you to renew your mortgage 90 to 120 days early without incurring any penalties, but if you’re not ready 4 months before your renewal date, use the time to review your goals and sit down with a mortgage broker to find out about other lenders and whether you could get a better deal elsewhere.
Lock in your rate 30 days before renewing
At least 21 days before your current term matures, your lender should send you a mortgage renewal statement, and generally, you’ll get an offer from your existing lender for their best posted rate around 30 days before your term is due to end. At this time, you can choose to lock in your rate or use it as a benchmark to help you compare lenders. You may also choose to complete the necessary paperwork at this stage, should you be swapping lenders.
If you are considering switching to a different lender to get a better rate and save money, it’s best to do so when renewing your existing mortgage, as breaking your term midway through, will almost certainly incur you a hefty prepayment fee.
To discuss your renewal options in more detail, and to get access to lenders and deals you might not have been privy to otherwise, it’s best to work with a local mortgage broker.