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Of Prime Interest: Mortgage renewal can allow for lifestyle changes
Every mortgage has a specific guaranteed interest rate for a set term period.
When that term is coming to an end, most banks will send you a mortgage renewal notice.
Mortgage renewals are one of the most neglected decisions made during the life of a mortgage.
Many homeowners stay with their existing mortgage lender because they believe it is too time consuming to shop around for a better rate.
For instance, rates available to a mortgage broker are often as much as 1.7% below the banks posted rate —that calculates into a savings of over $250 per month based on a $250,000 mortgage. Over a five-year term, that’s a $15,000 saving.
As well, a mortgage renewal holder can be pre-approved up to four months prior to the mortgage coming available for renewal.
This is the best of both worlds—a pre-approval will guarantee you the rate for up to 120 days and if the rate goes lower during that period you get the lower rate. A win-win situation to be sure.
Mortgage renewal time is your opportunity to make changes with your mortgage and not incur a penalty for doing so.
You can increase or decrease the mortgage amount, choose a new payment frequency, change your amortization or the type of mortgage you have.
The various types of mortgages available are fixed terms (anywhere from six month to 10 year terms), variable rate mortgages or a line of credit.
For example, a fixed rate mortgage could easily be switched to a variable rate mortgage or line of credit. And doing the reverse is also possible.
If you have any high interest loans or existing credit card debt, now might be the time to pay them off by rolling it over into your mortgage.
To increase a mortgage a renewal time, lenders will take into consideration the mortgage holder’s credit history, annual income, employment history and property value to determine those qualifications.
There is always the option at renewal time of depositing extra cash to pay down your mortgage without any penalty.
You can also leave all as is and simply negotiate a better rate.
Mortgage Renewal time is a great opportunity to make the changes that are reflective of your lifestyle today.