What To Do When Your Mortgage Is Up For Renewal
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When your mortgage is coming up to the end of it's term (a.k.a. maturity date), unless you have the means to pay off the remaining balance in full, you're going to need to renew your mortgage for another term.
At the end of a mortgage term, you have several different options:
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Renew With The Same Lender
Anywhere from 3-6 months prior to your mortgage maturity date, the Lender you currently have your mortgage with will be in contact with you to discuss your renewal options.
Depending on your Lender, they may call you to discuss by phone, send you an email or mail you a letter which outlines your options, or they may contact you to book an in-person meeting.
Your Lender is going to try to make it really easy for you to renew your mortgage with the hopes that you'll just agree to renew your mortgage with them without shopping around first. The convenience is nice but your Lender may not be offering you the best deal on your mortgage. There may be better options out there.If I was the one to set up your mortgage initially, then I will also be in touch with you in the few months leading up to your mortgage's maturity date to review the options your current Lender has offered you and also to review the options available to you elsewhere to ensure you get the best deal on the next term of your mortgage.
Depending on your Lender, they may call you to discuss by phone, send you an email or mail you a letter which outlines your options, or they may contact you to book an in-person meeting.
Your Lender is going to try to make it really easy for you to renew your mortgage with the hopes that you'll just agree to renew your mortgage with them without shopping around first. The convenience is nice but your Lender may not be offering you the best deal on your mortgage. There may be better options out there.If I was the one to set up your mortgage initially, then I will also be in touch with you in the few months leading up to your mortgage's maturity date to review the options your current Lender has offered you and also to review the options available to you elsewhere to ensure you get the best deal on the next term of your mortgage.
Switch Your Mortgage To A Different Lender
If it turns out that the options your current Lender is offering you upon renewal aren't the best deal for you or you're unhappy with the Lender for some reason, you can move your remaining mortgage balance to a different Lender. This is known as a switch.
There is a little bit of work involved in a switch.
Current regulations require you to re-qualify for the new mortgage, involving a credit application, credit check and document collection. The work may be a little tedious but it may be well worth it if you can save a bunch of money.
There are some fees involved in switching Lenders including: appraisal costs, legal fees to register the new mortgage and a discharge fee to leave your current Lender. The appraisal and legal fees are usually covered by the new Lender as a thank you for your business but the discharge fee is usually not covered and gets added to the balance owing on your new mortgage.
There is a little bit of work involved in a switch.
Current regulations require you to re-qualify for the new mortgage, involving a credit application, credit check and document collection. The work may be a little tedious but it may be well worth it if you can save a bunch of money.
There are some fees involved in switching Lenders including: appraisal costs, legal fees to register the new mortgage and a discharge fee to leave your current Lender. The appraisal and legal fees are usually covered by the new Lender as a thank you for your business but the discharge fee is usually not covered and gets added to the balance owing on your new mortgage.
Refinance Your Mortgage
Refinancing is the process of replacing your existing mortgage with a new mortgage.
If you have enough equity built up in your home, you can replace your current mortgage with a larger mortgage and withdraw the difference (equity) in cash. You can use that cash to do whatever you want...buy a car, travel, invest, pay off debt, renovations, etc.
Another way that refinancing can be helpful is to extend the amortization period of your mortgage. Extending the amortization on your mortgage stretches out the amount of time it takes to pay off your mortgage, which brings your mortgage payment amount down.
You can use each of the above strategies separately or together. You can withdraw equity and extend the amortization at the same time which can be a great combination as it will put money in your pocket (withdrawing equity) but not necessarily increasing your payment very much because you're extending the amortization period out.
The best time to refinance is when your mortgage is up for renewal because there are no penalties involved.
You may have options to refinance with the same Lender that your current mortgage is with but, again, it may not be the best deal for your needs.
If you have enough equity built up in your home, you can replace your current mortgage with a larger mortgage and withdraw the difference (equity) in cash. You can use that cash to do whatever you want...buy a car, travel, invest, pay off debt, renovations, etc.
Another way that refinancing can be helpful is to extend the amortization period of your mortgage. Extending the amortization on your mortgage stretches out the amount of time it takes to pay off your mortgage, which brings your mortgage payment amount down.
You can use each of the above strategies separately or together. You can withdraw equity and extend the amortization at the same time which can be a great combination as it will put money in your pocket (withdrawing equity) but not necessarily increasing your payment very much because you're extending the amortization period out.
The best time to refinance is when your mortgage is up for renewal because there are no penalties involved.
You may have options to refinance with the same Lender that your current mortgage is with but, again, it may not be the best deal for your needs.
Pay Off Your Mortgage Completely
If you have the means to pay off the entire remaining mortgage balance, this is the perfect time to do it because you won't have a penalty to pay. Your Lender will still charge you a discharge fee though.
Do Nothing
Each Lender has a different process for handling renewals if the borrower hasn't communicated their choice of options by the maturity date.
Some Lenders will just automatically renew the mortgage into a closed, short term fixed rate mortgage which means that the borrower is stuck with that Lender for the additional term at whatever interest rate the Lender decided to charge them. They can get out of the mortgage but there will be a penalty charged to do so.
Other Lenders will renew the mortgage into an open mortgage which means that there will be no penalty to get out of the mortgage but the interest rates on open mortgages are generally quite high compared to closed mortgages.
It's never a good idea to ignore the renewal date as it could cost you a lot of unnecessary interest charges and possibly penalties.
If you haven't decided which option is right for you by the time your maturity date arrives, the best thing to do is to contact your current Lender and ask them to renew your mortgage into an open mortgage. This will allow you more time to make your decision mortgage renewal decision without having to pay a penalty once you've made your choice.
Whether I arranged your current mortgage for you or not, please contact me to review your mortgage renewal options. There's a very good chance that there's a better deal out there for you than what your current Lender is offering you.
Some Lenders will just automatically renew the mortgage into a closed, short term fixed rate mortgage which means that the borrower is stuck with that Lender for the additional term at whatever interest rate the Lender decided to charge them. They can get out of the mortgage but there will be a penalty charged to do so.
Other Lenders will renew the mortgage into an open mortgage which means that there will be no penalty to get out of the mortgage but the interest rates on open mortgages are generally quite high compared to closed mortgages.
It's never a good idea to ignore the renewal date as it could cost you a lot of unnecessary interest charges and possibly penalties.
If you haven't decided which option is right for you by the time your maturity date arrives, the best thing to do is to contact your current Lender and ask them to renew your mortgage into an open mortgage. This will allow you more time to make your decision mortgage renewal decision without having to pay a penalty once you've made your choice.
Whether I arranged your current mortgage for you or not, please contact me to review your mortgage renewal options. There's a very good chance that there's a better deal out there for you than what your current Lender is offering you.
