As your mortgage term nears its end, you may be thinking about renewing. You may wish to consider factors such as your income, whether you have been ill or have lost your job and ultimately how these factors can impact your affordability of payments.
Here are five points to keep in mind before you begin the renewal process.
- Terms: You must be familiar with your end-of-term options. You will have the choice to either pay off the mortgage or you can renew for a new term. A Mortgage Term is usually about 5 years, it’s the length of time agreed on in the mortgage statement. The Maturity date is what the end of term is called. Amortization is the amount of time you need to pay your mortgage off, usually taking anywhere from fifteen to thirty years.
- Length: Discuss your financial situation with your mortgage broker, see what rates are currently available, and the forecasts for interest rates. Do you want to pay off the mortgage early, and how would that benefit you?
- Rates: It is important to be familiar with the rates. There are Variable Rates and Fixed Rates. Fixed rates are proven to provide security and help when it comes to budgeting. The interest rate and payments will stay the same throughout the term. Variable rates adjust with prime lending rates, so if the rates go down, you can pay off the mortgage quicker, but if the rates increase, you can potentially end up paying more. This type of rate can be riskier than a fixed rate. Always ask for a better rate. It can seem easy to just renew your mortgage for convenience, but the truth, it probably won’t get the best rate. Ask for a better rate, or see other offers.
- Open or Closed: There is a difference between an Open or Closed Term Mortgage. A closed term may have fewer options, but it has a low-interest rate. An open term allows you to pay off your mortgage fully, or you can make payments of any amount. Open terms are a bit more flexible and this flexibility is often attractive to clients.
- Can you Lock in a Term: New mortgage terms can be locked in 120 days before the current term ends. Usually, your current lender will notify you with time to decide on which options you want for your current situation. If you can’t get a better offer from your lender, you still have time to find a new lender. Although you may not be able to switch over until you reach the renewal date, you still give the new lender time to get the paperwork ready and give you advice.
So these are just a few things to keep in mind while you consider renewing your mortgage. If you have any questions, always ask your mortgage broker. Renewing mortgages don’t have to be a struggle, and with expert guidance, you can renew with confidence.