Mortgage Refinance or Renewal, Which One?
Some homeowners find it beneficial to pay off an existing mortgage and replace it with a new one, referred to as “refinancing”
Reasons to Refinance Your Mortgage
Homeowners consider refinancing for a number of reasons, but the most common are:
- Lowering one’s monthly payment to improve cash flow or free up money for a rainy day savings fund
- Consolidating high-cost consumer debt, such as credit cards, car loans or other personal loans
- Renovating one’s residence while taking advantage of possible federal home renovation tax credits
- Setting up a home equity line of credit or “HELOC.” This approach allows you to withdraw funds as needed, when needed. A HELOC can be established for a one-time cost and accessed many times without the need to re-qualify, provided payments are kept up-to-date.
Whatever the reason, or if you are just looking to benefit from a lower mortgage rate, it can make sense to refinance your mortgage. One tip to remember is to understand your prepayment features of your current mortgage and whether this can be factored in to decrease any penalty incurred.
Renewing Your Mortgage
When an existing mortgage is about to expire and you don’t need to make any changes, like increase the loan amount or type of mortgage, it is time to renew your mortgage contract (otherwise it is called a refinance). Most Canadian banks will send a mortgage renewal notice in the mail usually one to two months prior to the term expiration indicating various contract extension terms and interest rates available. The majority of borrowers select an appropriate renewal term and rate, sign the form, and return it to their lender.
“The sad reality is, the banks are well aware of our busy schedules and propensity to take the path of least resistance”
Existing lenders tend to offer less than competitive rates at renewal hoping that we simply accept their renewal offer without researching what the competition has to offer. The end result is that more of our monthly payment goes more towards interest payments than need be and it takes us years longer to be mortgage free.
Tip: When you work with a mortgage broker, you will always have independent access to the mortgage market, so when renewal time is upon you, you can easily find out if your current lender is still the best lender for you. You are welcome to register your next renewal date and we’ll keep you informed.
Important
If you switch lenders or refinance, you must re-qualify. Please make sure you can mortgage-qualify under the new rules!
“To mortgage qualify, you need sufficient Income, Credit, and Equity (I.C.E.)”
Remember When You Applied For Your First Mortgage?
You asked questions, did research, talked to a mortgage broker, and found the best mortgage rates and options for your situation.
- Mortgage brokers typically can offer you the lowest possible mortgage rate available in the country.
- As the broker works for you, there is no haggling or negotiating simply because if he or she can’t offer you better rates and service, they don’t get your business and,
- Unlike the banks, there is no incentive or reward to the mortgage broker for making you pay more than you have to!
Your mortgage is the biggest loan you will likely ever have, so you gotta' keep chipping away at it!
If you move your mortgage to a different lender, the renewal is called a switch. Many lenders offer no cost or low cost switches to better rate options. Renewing or switching your mortgage means, essentially, a fresh start and presents the perfect opportunity to re-assess your needs and make sure your mortgage suits these changing needs.
In many cases, existing lenders will insist that moving your mortgage to another institution will cost you money, but this is NOT the case. Mortgage renewal is big business and very competitive. Many lenders will pay for all renewal expenses including:
- Legal costs
- Appraisal
- Property title insurance
- Transfer fees
Let's Get Started
As professional mortgage brokers, we can clearly explain the renewal or refinance process and access a vast network of mortgage lenders to find you the right mortgage at the right rate for your renewal.
Effort on your part is small and the reward of being mortgage free years earlier, well worth it.
If the time is not quite right, please feel free to register your mortgage renewal date with us and we’ll keep you informed.
More Resources
- Free Guide -Renewing & Renegotiating Your Mortgage
- Free Guide -Borrowing On Home Equity
- Free Guide -Pay Off Your Mortgage Faster
- Free 15 minute Renewal Consultation
- Reverse Mortgages – seniors can tap into home equity without moving or making payments
- Financing Home Improvements