Top 5 things to consider before renewing your mortgage

Top 5 things to consider before renewing your mortgage

Mortgage Renewal Tips & Advice

Considering that the current national average home price is just over $500,000, a substantial section of your monthly household budget might go towards paying off the mortgage. However, with some smart thinking, you can get more economical rates and favorable terms and conditions with the renewal process. Use these tips before you sign the renewal offer you receive in the mail.

Start Shopping Early

Should you choose to renew the current mortgage, you can complete the process in the 120 days before the mortgage term ends. You won’t incur a penalty for breaking the mortgage, but you may also not receive the best mortgage rate and product available in the market. Instead of signing and returning the renewal letter, you might want to do your homework and scout around for the best offers available. Check online or consult a mortgage broker before the mortgage end date.

You Can Ask for a Better Rate

Close to the end of your mortgage term like in the last 30 days, your lender is likely to send you a renewal letter by mail. The letter will likely include a discount of 0.75% off on the existing mortgage rate you’re already paying. A very convenient option is to simply sign the letter and send it back to maintain your mortgage.

But, by accepting it, you could pay an interest rate that is higher than the market rates. You could contact your lender and negotiate the possibility of getting a lower rate of interest. However, you have a better chance of getting the rates you want if you switch to another provider. The bottom line is that you need not accept the first offer you receive.

The Best Lender Before Won’t Be the Best Lender Today

When choosing a mortgage provider, make sure that the rates of interest and other terms like prepayment options are perfect for your current life and financial situation. Also, keep in mind that mortgage renewals are no doubt convenient but they also cost you high rates of interest that you can avoid with a little effort. You might have chosen the best lender 5 years ago but his terms may not be suitable for you at the present time.

Get a Rate Hold

Having negotiated the perfect deal with a new mortgage provider, you cannot complete the transaction right away. You’ll need to wait for the end of the mortgage term or you could incur the penalty for breaking your mortgage. Accordingly, you have the option of getting the provider to hold the agreed rate. Most lenders assure you that you can have the same rate at the time of renewal even if the rates have increased.

However, you’ll have to request for the renewal within a period of 90 to 120 days. At the same time, in case the prevailing interest rates have dropped further, you can always negotiate for the best rate possible.


Switching Providers Takes Time

In case you choose a new mortgage provider within the renewal period, you must begin with the procedures well ahead of the end of the mortgage date. Your new lender may take the time to assess the paperwork you provide and match you against their qualifying criteria. Do keep in mind that lenders typically have their own criteria for evaluating borrowers. You might want to give your new lender at least a couple of weeks to get the paperwork in order. In addition to your application letter, you’ll need to provide:

  • Proof of employment and an income source
  • Documents showing you own the property
  • Proof that the property is insured
  • Copy of the mortgage renewal letter received from the current lender

If the procedures aren’t completed by the mortgage end date, you may have to renew your mortgage with the current lender at whatever terms and conditions he provides.


Most Providers Will Do the Switch for Free

When negotiating terms with a new mortgage provider, be sure to ask about the applicable fees. These may include the discharge fee from your current provider, the property appraisal fee, and any others. Many lenders offer to cover the fees in an attempt to make their offer more attractive. See if you can factor in this facility in your deal.


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