What to Expect During Your Mortgage Renewal Process
When the initial term of your first mortgage comes to an end, you'll be given the option of renewing your mortgage with your current lender or switching lenders to take advantage of better interest rates and more favourable terms. Here's what you can expect during the mortgage renewal process.
Discounted Rates
Mortgage renewal statements are typically mailed out 4 to 6 months before the renewal date. Your statement contains important information about your home loan, such as your current mortgage balance, mortgage payment amount, and payment frequency. Use this information and the 4 to 6 month time frame to compare the rates offered by other lenders to the rate offered by your current lender.
Lower Interest
First-time mortgages typically carry fixed interest rates for the duration of the term. During the mortgage renewal process, you'll have the option of taking advantage of a variable rate loan, which can reduce the total amount of interest paid over the life of your mortgage. Mortgage renewal also gives you the opportunity to negotiate better terms, such as payment schedule flexibility.
Administrative Fees
If you're switching lenders, it's important to note that the new bank will pay for legal, administration, and appraisal fees for your mortgage renewal. The benefit is you can get a lower rate and better terms at no cost to you. Be prepared that the new lender will want supporting documents such as income proof.
New Credit Application
Another thing to consider if you plan to switch lenders is that you'll be required to submit a new credit application. For borrowers with good credit, this is little more than a formality. If your credit rating has dropped since you obtained your first mortgage, however, you may have difficulty qualifying for a mortgage renewal with a new lender. Before applying for a mortgage renewal, consider how your credit score will affect your ability to obtain a new home loan at your preferred interest rate.
Knowing what to expect when renewing your first mortgage can streamline the renewal process and place you in the best position for negotiating better terms. Contact us for more information about how we can help you prepare for your mortgage renewal.
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