|Renewing a Mortgage?
A Guide to Mortgage Renewal
Many traditional mortgages last for 25 years, but you do not have to wait until your mortgage expires to renew a mortgage or consider any kind of mortgage renewal.
In fact, as most modern mortgages do not lock you in, it pays to look around regularly for better deals simply because mortgage rates can change drastically during the duration of your mortgage term.
If you renew a mortgage, you may benefit greatly from switching from your initial mortgage to a more flexible option or one with a more favorable interest rate.
A mortgage renewal can be advantageous if you want to:
- reduce the interest rate and monthly costs on your existing mortgage balance
- raise additional capital or release equity to enable you to make a major purchase or consolidate debts or move house
- move to a new lender to achieve new benefits
Some key tips on mortgage renewals
- When your mortgage deal expires, do not just put renew it blindly. Take time to review existing interest rates of several mortgage renewals as well as your current job and family situation.
- You may find that negotiating different terms or switching to a different lender when you are renewing a mortgage not only saves you money, but could significantly reduce the term of your mortgage.
- Be prepared. Do not wait until your lender notifies you that your mortgage is up for renewal. It is a good idea to start thinking about renewing a mortgage months in advance.
- While it may be convenient to renew mortgages online, over the phone or by mail, it is worthwhile having a face-to-face visit with your lender to discuss ways that he/she could help you. This one visit could make you a significant savings in the long run with your mortgage renewal.
- When renewing a mortgage, make sure you look for a lower interest rate as well as an overall mortgage deal with more benefits. Remember, saving even a few hundred dollars extra every year adds up over the life of your mortgage.
- Do not be lazy or wary of switching lenders when it is time for your mortgage renewal. It is common, but unnecessary to stick with your initial lender to the very end.
- It may be a good idea to employ the services of a professional mortgage broker to secure the best mortgage renewal deal on your behalf. Mortgage brokers sometimes have access to the best deals not easily available to the general public.
- If appropriate, it can also be a good move to start renewing a mortgage early if you find a low rate that you want to lock in. You will, however, probably have to pay a penalty for breaking your present contract. In spite of this, it could still save you a good sum of money in the long term.
When it is time to think about renewing a mortgage, one of the easiest ways to check which deal will benefit you is to use the various mortgage calculators available online. By entering specific details about your current mortgage, along with new loan amortization, rates, and any penalties, it will show you how much interest you can save if you find the right mortgage renewal.
It is certainly worth considering a mortgage renewal if after calculating, you reach a breakeven point which occurs when your interest savings at least equals your additional closing costs and prepayment penalties.
Lastly, remember that the simple process of renewing a mortgage can save you an absolute fortune. Just shaving 1% off a $100,000 mortgage will reduce your mortgage costs by around $80 a month.
Mortgage renewal could be the most effective way to reduce your monthly expenditure significantly and save a large sum of money.
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