The time has come for you to renew your mortgage. Just like when you purchased your first home, now is the time for negotiations. Start thinking about your financial goals, it’s time to explore the process of mortgage renewals and how you can make the most out of it.
Your Mortgage Renewal Statement
Typically, your lender will provide you with a renewal statement at least 21 days before the end of the existing term. This statement will show you some very important information about your mortgage that is crucial to fully understand at this time which includes the following:
The balance of your mortgage at the renewal date
Any charges or fees that apply
Whether the lender will accept your renewal or not
Included in your mortgage statement will (sometimes) be a mortgage renewal contract. This implies that the lender will be happy to renew your mortgage, we advise that you review this contract with your mortgage broker.
Why Do Mortgage Renewals Get Denied?
Lenders have the ability to decline your mortgage renewal. For the most part, a lender will decline mortgage renewals based on a few factors. If you have been missing payments for example, it’s likely your renewal will be declined. Another factor is that when your mortgage is up for renewal, the lender will perform a credit check to ensure you’re still in good financial health. Even if you have been keeping up with monthly payments a lender could deny the mortgage if you’re showing financial distress. In the case that your lender denies your mortgage, speak to your Calgary mortgage broker and we’ll get you set up with different options to pursue. Remember these two important factors to ensure you’re in good standing with your mortgage lender.
Any missed payments in the past will reflect poor financial responsibility and you will likely be declined.
A credit check will be performed to ensure you’re still in good financial health. If the credit check goes poorly, you will likely be declined.
Review Your Financial Situation
With mortgage renewals, you have the opportunity to change your preferences to suit your evolving lifestyle! This is a great opportunity to re-evaluate your finances and choose mortgage options that better suit your current situation. For most homeowners, a mortgage renewal comes 5 years after the purchase of the home. Usually after these 5 years homeowners have had changes in their lives which have impacted their financial situation. This is your opportunity to switch up your mortgage plan to reflect this evolution.
You might be thinking, “I’m fine the way my mortgage is!” but the point is not to be “fine” with your mortgage, it’s to take advantage and make your mortgage work towards your financial goals.
Here are some things to consider:
Do you have the ability to increase your monthly payments? This means you can pay off your mortgage sooner, and save on interest charges!
Do you want to change your payment frequency? Switching from monthly payments to accelerated bi-weekly payments may allow you to pay off your mortgage sooner.
Are you satisfied with your current lender?
Do you want to consolidate other debts that have higher interest and increase the amount of your mortgage loan?
Shopping For A New Lender
The advantage of mortgage renewals is that they give homeowners a chance to re-evaluate their current lender on top of their financial situation. You can choose to move your mortgage to a different lender if they have an offer that better suits your needs.
If you’re thinking about switching lenders, it’s important to have the details taken care of a few months before the end of your mortgage term. Your mortgage broker will help you with this! In fact, they will drive the bus for you, getting quotes and doing all the negotiating so all you have to do is pick the option you want.
Do not wait until you receive your renewal letter from your lender to begin thinking about your options.
One of the worst mistakes one can make is not being prepared to renew their mortgage. You don’t want to be stuck with the same mortgage payments especially if you have better options out there.
The Cost of Switching Lenders
To switch lenders, you may need to pass a “stress test”. A stress test is imposed to ensure that if interest rates rise, the homeowner still has the means to pay the mortgage. This is usually higher than the actual rate in your mortgage contract. When switching lenders there may be other charges such as:
Transfer or assignment fees from your current lender
Appraisal fee to confirm the value of your property
Other administration fees
Your mortgage broker will be able to walk you through these fees. Remember that your mortgage broker is there for you, always.
Preparing For Your Mortgage Renewal
It’s never too early to start preparing for your mortgage renewal. In fact, it’s best to keep it in the back of your mind throughout homeownership. A huge portion of your mortgage renewal is another credit check. This credit check will show your financial responsibility. Don’t forget about your credit rating after you purchase! It’s very important.
For more information on preparing for your mortgage renewal, read this blog.
Is Your Mortgage Renewal Date Coming Up?
Your unique situation merits a unique answer. If your mortgage is up for renewal soon, please get in contact with your mortgage broker and begin discussing your options.