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Do Not Sign Your Mortgage Renewal Papers Until You Read This!

Did you know the 2016 CMHC survey found that 39% of households automatically renew their mortgage when their term is up? You may be missing the opportunity to find a better deal. If your mortgage is up for renewal within the next 4 months, it’s a good idea to start thinking now about what you’re going to do when your mortgage term ends. This week I want to highlight the mortgage options available at renewal time so you can make an educated decision on how to proceed into the next term of your mortgage.

Renew your mortgage with the same lender

If you don’t want to make any changes to your current mortgage amount or amortization, a simple mortgage renewal could be the solution for you. Your existing mortgage lender will usually send you an offer to renew near the end of your mortgage term or maybe sooner, depending on the lender. This document will contain the different mortgage term, and rate offerings for you to choose from. The benefit of renewing with your existing lender is minimal paperwork is required as most often you are not required to re-qualify for the mortgage, and there’s usually no costs involved unless your lender is charging you a renewal fee. This is ideal if you just want to sign on the dotted line, though the downside is you may not have initially been offered the best rate that lender has available. Often the rates are negotiable and you don’t get what you don’t ask for, however, before having the rate talk with your lender do some research first to determine what exactly the “best rates” are for your current financial situation.

Renegotiate your mortgage with a different lender

If you’re okay with your current mortgage amount though want to make changes to the interest rate, or any of the other terms of your contract not offered by your current lender, you may want to look at renegotiating your mortgage with a different lender. If you are considering this option, be prepared to provide your current financial details by completing a mortgage application. You will also be required to submit supporting documentation to your new mortgage lender. As you don’t have a mortgage repayment history with this new lender they will want to re-qualify you for the mortgage, which will require them to order a credit report. Usually a mortgage “switch” doesn’t involve any costs charged by the new lender, they will cover them, though there may be some small administration costs of $200-$300 charged by the lender you are leaving.

Refinance your home

A refinance is perfect if you want to access some of your home equity at renewal time.  Refinancing your home allows you to restructure your mortgage amount, term, interest rate and amortization. If you have sufficient equity available, you could pay off debt, invest, renovate and more. There are some costs required to refinance your home that may include an appraisal and mortgage registration fees, though they likely won’t be as high as what you paid when you originally purchased the home. Some lenders will offer to pick up some of the costs to their refinance customers, though the interest rate charged may be a bit higher. Others will offer some small cash back amounts to help reduce any out of pocket costs that need to be paid, however, again the rates offered may be a bit higher. It’s important to determine if it makes better sense to take the lower rate and pay the refinance costs out of pocket versus paying the higher rate.

The next step is deciding on which of the 3 ways you want to access your equity at renewal time;

  1. 1) Restructure your first mortgage to accommodate the extra funds you want out of your home.
  1. 2) Request a second mortgage which will allow you to leave your first mortgage details the same. As the 2nd mortgage is registered against your land title behind the existing 1st mortgage, some 2nd mortgages come with higher rates and possibly upfront fees.
  1. 3) Lastly, if you qualify, a home equity line of credit could be the solution you’re looking for. It can be registered behind your 1st mortgage and offers a variable interest rate, an open term and interest only payments.

A lot can change in your life during the term of a mortgage including income, assets, debts, and overall financial profile. It’s never a bad idea to give your mortgage a check-up at renewal time to ensure it aligns with the financial goals you are trying to achieve. Do explore how you can make your mortgage work to your benefit by partnering with an experienced mortgage professional on the perfect financing solution for your specific situation right now.

For all your mortgage needs, contact Jackie at 780.433.8412 or info@mortgagegirl.ca. Stay in the loop by following on Twitter @Mortgagegirlca.

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2 thoughts on “Do Not Sign Your Mortgage Renewal Papers Until You Read This!

  1. Pingback: 6 Mortgage Products You Haven’t Heard Of |

  2. Pingback: How to increase your home equity |

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