Mortgage Renewal BC: Best Option for Homeowners

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When you first obtain a mortgage, you are unlikely to consider the renewal procedure. After all, you’ve likely already jumped through enough hoops to get your application approved, and the last thing you want to do is contemplate another lengthy process. However, before you realize it, your term — whether one year, five years, or longer – will have expired, and you will be faced with the prospect of renewing your mortgage.

Renewing your mortgage

When your current mortgage term expires, and you sign on for a new one, this is a mortgage renewal. (Or pay off your mortgage, in which case it’s time to celebrate, as you won’t be required to sign up for another term!) This is your opportunity to renegotiate the conditions of your mortgage contract, including the length of your next term, the interest rate on your mortgage, and even your lender. At the same time, some lament that you cannot lock in your mortgage terms for the duration of the amortization period as you can in the United States. The ability to change the terms of your mortgage at predetermined intervals means that you can also adjust your mortgage. It is to better align with your changing needs since you obtained or renewed your mortgage and what is happening with the economy.

When the period of your mortgage approaches its end, keep a watch on your mailbox or email inbox. The majority of lenders – at least those regulated by the federal government – are obligated to send you a renewal statement at least three weeks before the end of your term. This may arrive in the mail or through email and will include the same information about your mortgage as your regular statements, such as your current balance, payment amount, and payment frequency, as well as a renewal form that you may sign and return.

When you sign for a new term, you are essentially signing a new mortgage contract — the old term’s payments are forfeit. Thus, if you have $350,000 remaining on a $475,000 mortgage, your new mortgage will be for $350,000.

The signing could be detrimental to your health.

The majority of homeowners renew their mortgage with the same lender that already holds their loan. That may not seem significant on the surface. Still, a 2015 mortgage consumer survey discovered that more than half of homeowners renewed their mortgages without negotiating terms different from those offered in their renewal statement. Perhaps, as a result, lenders are not as generous with their words as they could be. When it’s time for renewal, lenders are banking that you won’t want to deal with switching lenders and the trouble of supplying all the documentation required to qualify for a mortgage with a different lender. They hence aren’t bending over backward to retain you. While it is much simpler and more convenient to accept the terms, sign the document, and return it, you may be missing out on thousands of dollars because you can likely find cheaper rates and more flexible terms elsewhere. Not in the mood to shop? Please make an appointment with your mortgage broker to have it done for you.

If you’re considering switching lenders, you’ll likely save money in the long run. However, switching lenders may cost you quite an amount of money in the near term, such as the cost of an appraisal and other administrative charges related to discharging your current lender’s mortgage and registering it with your new lender. Additionally, you may be required to retain the services of a lawyer or notary and pay legal expenses. Suppose your amortization period is still relatively long. In that case, the money saved by obtaining a lower interest rate and avoiding significant prepayment penalties will enable you to pay off your principal faster and discharge your mortgage sooner, making the upfront expenses associated with switching lenders beneficial. However, if you only have a few years left on your mortgage, staying put may make more sense. Additionally, bear in mind that a new lender or your mortgage broker may be ready to absorb a portion of these charges on your behalf. Inquire before making the changeover to ensure that you understand exactly what to expect.

Options for early renewal

Certain mortgages include an early renewal clause as one of their terms. ThisMortgage early renewal is a convenient choice if interest rates begin to rise and you are still locked into a mortgage that will mature in a few months. Additionally, you may be permitted to lock in interest rates a specified period before renewal so that if rates change between then and the maturity date of your term, you will receive the locked-in rate.

Certain mortgages offer a prepayment break at renewal time, allowing you to make a lump sum payment toward your principal without paying any fees. Consult the conditions of your mortgage arrangement to determine whether this applies to you.

Renewal issues with mortgages

If you’ve consistently made your payments on time, you should have no problems at renewal time. However, in some instances, your lender may elect not to renew your mortgage. Suppose your credit rating has deteriorated dramatically during the duration of your mortgage, for example. In that case, you may find yourself hurrying to find a new lender if your existing lender no longer considers you a creditworthy borrower. There are other options, and you can always refinance your mortgage, though you will almost certainly pay a higher interest rate, just as you would have if you had a poor credit history when hurrying you got your mortgage.

Additionally, you may encounter less favorable terms if your financial situation has changed since you obtained your previous mortgage. For instance, if you and your spouse were salaried employees when you received your mortgage, but one of you has since started their own business or is getting unemployment insurance, you will also consider this. If you are aware that your mortgage is about to expire, take steps to stabilize your finances, just as you did when you initially submitted documentation to your lender.

Bear in mind your broker.

Brokers are beneficial for various reasons, not simply when obtaining a mortgage for the first time. They can assist you the same way they did the first (or second) time around: by shopping for the best rates from several lenders and completing the homework for you. Contact your broker a few months before hurrying the end of your term to begin the procedure on your behalf. Even if you enjoy your contacts with your existing lender and wish to remain with them, a mortgage broker can be invaluable during the negotiation process, ensuring that you continue to receive the best terms and rates possible.

Knowing what the mortgage renewal process comprises and being prepared for it will enable you to feel confident in your mortgage selections and continue to make your mortgage payments on time for the remainder of your next term.