HOW TO GET THE MOST SAVINGS WITH A MORTGAGE RENEWAL
Did you know that 27% of people who have mortgages let them renew automatically without giving it any thought? Yes, you did hear correctly! That’s a sizable portion of people who are passing up chances to improve their financial circumstances.
Now, let’s take a closer look at mortgage renewals and discuss the aspects that will help you, the borrower.
What distinguishes short-term mortgages from long-term mortgages?
Term lengths of under five years are considered short-term mortgages. The need to renew or refinance your mortgage will occur sooner the shorter your term. With shorter-term mortgages, you can choose between fixed and variable interest rates and benefit from a reduced rate when you sign up. A short-term mortgage will be a better choice if you anticipate making a significant life change soon (such as selling your home) in order to avoid incurring hefty prepayment penalties.
Long-term mortgages are those with periods longer than five years. If you wish to maintain the terms of your present contract for a long time, they are a fantastic choice to take into account. You are normally limited to a fixed interest rate, but if rates are low, this might be a positive thing! However, if you sell your house before the term’s first five years are through, you’ll be hit with a sizable prepayment penalty. You should therefore think about your life events during the next five years.
Before selecting a mortgage term length, take into account:
(1) Do you intend to pay off your mortgage sooner than expected?
(2) Are higher interest rates anticipated? Decrease?
(3) What are the best prices and terms that are offered?
(4) Do you anticipate any significant life changes in the near future? selling a residence? Moving? Downsizing? Etc.
Great, but what are the advantages of renewing a mortgage?
Mortgage renewals are an excellent way to modify the conditions of your existing agreement without having to submit a new loan application. The length of the period, interest rates, the frequency of payments, any additional fees or levies, etc. are examples of conditions. Many advantages include:
Reduced interest rates: By bargaining, you might be able to get a better deal on your mortgage, which could save you a lot of money over the course of the loan.
Reduced monthly payments: Lower monthly payments are another benefit of a reduced interest rate because you’ll have more money to use for other expenses.
Improved terms and conditions: You may be able to negotiate better terms and conditions when renewing your mortgage, such as a shorter amortisation time or the addition of a prepayment option.
Flexibility: You may be able to increase your mortgage’s flexibility by negotiating the renewal of your mortgage. For example, you may be able to modify the type of mortgage you now have or break your mortgage early without incurring penalties.
Relationship-Building: When you bargain with your lender, you can also strengthen your bond with them. This will be helpful if you ever need to renegotiate or refinance your loan in the future.
You might not get the best interest rate and contract terms if your mortgage renews on its own with your current lender. Lower borrowing rates, for instance, equate to more money in your pocket.
A 120-day opportunity is provided for borrowers to renew their mortgage.
Your current mortgage lender will typically send you a renewal slip 30 days prior to the maturity date of your mortgage term (expiration). You may begin negotiating, though, as early as 120 days before the maturity date. Starting the process early will enable you and your mortgage agent to comparison-shop and make sure all the paperwork is complete, preventing last-minute frenzies.
Give yourself at least 3 weeks to finish the mortgage renewal procedure. By doing this, you can be sure that your future mortgage term will be properly documented. Yet starting the process early will give your mortgage agent or broker time to compare rates and/or bargain terms with your present lender.
Conclusion
It’s not always the greatest idea to renew with your present lender just because it’s simpler and faster to do so. To make sure you are getting the best deal, it is always a good idea to shop around and compare rates and terms from various lenders.
Contact us right now! At Anava Financing, we’re here to assist you meet all of your mortgage demands and financial objectives.
