Will my Mortgage Automatically Renew?
Your mortgage lender may or may not automatically renew your mortgage, it depends on the circumstances.
If the lender believes you are still a good risk, meaning you didn’t rack up a lot of credit, your employment didn’t change for the worse, or nothing else in your financial life changed drastically, they may automatically renew your mortgage.
You don’t have to accept this, though. Automatic renewal may come with higher interest rates or less attractive terms. You may talk with other lenders, but you must act before the mortgage term expires.
What is the Mortgage Renewal Process?
Each mortgage renewal process will look different, but here are some basic steps to consider:
- Six months before your term expires, start looking for a mortgage. Look at what lenders offer today, including interest rates, prepayment penalties, and payment frequencies. Think about what you want in a renewal of mortgage. What don’t you like about your current mortgage?
- Think about your financial goals. Where do you stand financially right now? What are you trying to achieve in the next 5 to 10 years? These answers play a role in your decision. Will you move soon? Do you have large expenses coming up (child’s university tuition, retirement, etc.)? Do you want to pay your mortgage off sooner?
- Do you need to consolidate consumer debt by borrowing more from the lender? Do you need to add or remove insurance protection from your mortgage (life, critical illness, or disability insurance)?
- Get quotes from other lenders. See what interest rate, terms, payment frequencies, and prepayment penalties other lenders offer. You may find better deals elsewhere as lenders try to earn your business.
- Negotiate with your current lender. Don’t take your current lender’s mortgage renewal letter at face value. Negotiate the rate and term of the contract. If you have quotes from other lenders for mortgage renewals, discuss it with your lender.
Is Early Mortgage Renewal an Option?
Your current mortgage lender may send you an option for early mortgage renewal. They may make it sound simple and attractive, but explore your options.
Early mortgage renewal (without a prepayment penalty) is only available through your current lender. Many lenders send you a mortgage renewal letter within 120 days of mortgage renewal with what looks like attractive terms. In reality, it’s typically less than 1% lower than the current offered rates.
All you have to do is sign the contract and mail it back and you renewed your mortgage. This usually isn’t the most affordable or lucrative option for borrowers, though. Exhaust all options before accepting an early mortgage renewal offer.
What are my Options at Mortgage Renewal Time?
At mortgage renewal time (don’t wait until the last minute), you have a few choices:
- Pay the balance in full and become mortgage free
- Stay with your current lender and take the new interest rate they offer for mortgage renewal
- Stay with your current lender, but negotiate a lower/better rate based on your qualifications
- Renew your mortgage with a new lender
- Refinance your mortgage
If you don’t wait too long, you should have time to explore your options. What do other lenders offer?
Applying with multiple lenders may seem time-consuming. Between the phone calls, applications, stress tests, and many questions, it may seem easier to accept your current lender’s offer. But we make the process easier for you. As a mortgage broker, we network with many lenders, each with different mortgage renewal options. We’ll help you explore your options, finding the best way to switch mortgage lenders and mortgage renewal.
If you’re ready to explore your mortgage renewal options and are within 180 days of your term ending, let’s talk. We’re here to help homeowners throughout the Owen Sound and area including Grey County and Bruce County, Ontario, Canada area with renewing their mortgage. Call, email, or send us a text. We can talk over the phone or set up an appointment to meet in person to discuss your mortgage renewal needs.