Renewing your mortgage is something you’ll have to do several times before it’s fully paid off. Though it may initially seem like a straightforward process, there are many factors to take into consideration when the time comes to renew your mortgage. Before signing on the dotted line with your lender, you’ll want to conduct some research to ensure that when your mortgage contract is renewed, it’s to your benefit.
Examine your current financial position
It’s critical to evaluate your current financial situation and examine what your goals are when it comes to your finances.
Consider the following:
- Are you comfortable with your current monthly payments?
- Has your employment situation changed drastically?
- Have your expenses increased?
- Are you able to handle fluctuating interest rates?
- Do you foresee selling your home soon?
Asking these questions will help narrow your options and determine the type of mortgage that’s best suitable for you and your lifestyle. For example, if you’re less certain about the stability of your income, it may be wise to choose a fixed-rate mortgage, rather than a variable-rate one, as the former affords you the ability to pay the same amount each month without having to worry about rising rates.
Start shopping early
It’s not in your best interest to wait until the last minute to renew your mortgage. Ideally, you’ll want to begin shopping around up to four months before the official renewal date, which will give you ample time to inquire with various lenders and evaluate your options.
Get a rate hold
Depending on market conditions, it may be in your best interest to secure a rate as soon as possible. Many lenders allow their customers to renew up to 120 days before the renewal date, so you can easily lock in a favourable rate if need be. In case the prevailing interest rate drops before the renewal date, you can negotiate for a new rate to ensure you get the best one possible at the time.
Switching lenders takes time
Should you opt for a new lender during the renewal period, you must begin early to ensure all required documents are submitted and that you qualify against their criteria. Each financial institution has its own set of procedures and criteria that must be met, so it’s best to start at least a few weeks before the renewal date.
While most institutions will do a switch at no cost, it’s prudent to inquire about any applicable fees you may have to incur (discharge fees from your current provider, property appraisal fees, etc).
Renew or refinance?
Your life can change a lot over the course of your mortgage term. You may need to do major renovations to your home, consolidate your debt to manage cash flow better, reduce your mortgage payments to offset lower employment income, or take into account the needs of a growing family.
Depending on your personal circumstances, it might better to refinance your mortgage. During the refinancing process, you will be provided with a mortgage contract with a new principle, term, rate, and amortization period. If needed, you can also look into adding a home equity line of credit, should you need some extra cash.
