If you're getting close to the time to renew your mortgage, it's the perfect opportunity to take stock. Start by closely reviewing your current financial situation, your goals, and your plans for the future. Then think strategically about how you can secure the best mortgage renewal terms that will help with all of the above. We've put together some ideas to get you started.
Most lenders offer the option of early renewal, typically 120 days before the end of your current term. Why is this a good idea? By renewing early you can lock in at current interest rates and avoid any penalties. If rates happen to rise before your renewal date but you locked in early, you could save thousands of dollars in interest. Generally your lender will contact you three months before your renewal date; you can renew at that point or any time leading up to your actual renewal date.
If you choose not to renew early, we recommend that you ask for a renewal rate guarantee. About three weeks before the end of your current term, you should receive a renewal form from your lender in the mail. It should detail your payment options, as well as outline your 30-day rate guarantee. This guarantee means that you are protected from an interest rate increase in the 30-day period before your scheduled renewal date. If the interest rate happens to increase before your actual mortgage renewal date arrives, you will automatically receive the lower rate for the interest type and term chosen.
In order to secure the very best mortgage renewal terms, you need to know your interest rate preferences. Will you be better served over the next few years by fixed or variable rates? What is your comfort level with each? This is the time to do some research, to look back and assess how you were able to weather payments over the past term, and also to make a list of any questions you have for your lender. (Be sure to take this list with you so you are prepared.) With a mortgage renewal you are starting fresh, so take advantage and adjust the terms to suit you best.
As we mentioned at the top of this post, renewing your mortgage is the perfect time to take stock of your current financial situation. Rather than charging ahead, take some time to carefully evaluate where you are in your life right now. Be realistic about your future plans. Do you want to renovate? Are you planning a move? Have your personal circumstances changed? Maybe you are contemplating a career switch or growing your family. Several factors can affect your cash flow, and it's best to try to account for these ahead of time, as much as you can.
Our last piece of advice is to take your time. Don't allow yourself to feel pressure from your lender, or to feel you have to act on the first offer they present. To get the best mortgage renewal terms, it could mean not accepting that first renewal offer. Many don't realize that renewal rates are negotiable and that you do have some power here. Search online for competing offers you can present to your lender. Having these numbers in hand can help you present a strong case. If your lender knows you would consider leaving for the best available rate, they may offer you a better one. Just be sure to pay close attention to features and terms if you do consider switching; every mortgage product is different.
Armed with this knowledge, you should get the best terms for your next mortgage renewal. Do your research, ask questions, and be confident in your ability to negotiate. Thanks for reading and don't forget to follow the Marina Homes blog for more great home financing tips.