Every mortgage has a specific term, guarantee of a set interest rate for a period of time.
When a term is coming to a close, 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.
Rates available to a mortgage broker are often as much as 1.95 per cent below the banks posted rate.
That calculates into a savings of over $311 per month based on a $250,000 mortgage. Over a five-year term that will save you $27,800.
As well, you can be pre-approved up to four months prior to your mortgage coming available for renewal. This is the best of both worlds for you—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 mortgage renewal is your opportunity to make changes to your mortgage without incurring a penalty.
Options include to increase or decrease the mortgage amount, choose a new payment frequency, change the amortization or the type of mortgage.
The various types of mortgages available include fixed terms (six month to 10 year terms), variable rate mortgages or a line of credit.
For example, if you are in a fixed rate product you could at this time easily switch to a variable rate mortgage or line of credit or vice versa.
If you have any high interest loans or existing credit card debt now might be the time to pay them off and include them in your mortgage.
If you are increasing your mortgage at renewal lenders will take into consideration your credit history, annual income, employment history and property value to determine your qualifications.
You may also have extra cash available, which at renewal time can be applied to pay down the principle without an interest penalty being tacked on.
Mortgage renewal time is a great opportunity to make the changes that are reflective of your lifestyle today.