Generally, there are 2 options when your mortgage is up for renewal:
- Renew with your current lender
- Switch/refinance your mortgage to another mortgage lender
Renewing Your Mortgage With Your Current Lender
The easiest option is to renew with your current lender. Usually, you aren’t required to prequalify. Your current lender will offer you several different terms and options. All you have to do is select the one you want and sign the paperwork. Easy!
That’s it. You’re done.
While this is the easiest option, it can also be costly. While some lenders will put their best foot forward and offer you competitive rates at renewal, it’s not uncommon to see higher rate offerings. A high percentage of people simply sign their renewal agreement. Lenders know this and often offer a higher rate knowing that a large portion of their clients will simply take it.
Unfortunately, there are many people who will simply sign the renewal offer and send it back to their bank, without bothering to check other options. It’s rare to see a lender try to gouge with such a high rate offering at renewal, however I’ve seen it done. Banks know that there are some people who will fall into their trap, and sign the form and send it back at the higher rate.
For many of us, time is precious, and the path of least resistance can be enticing. However, it can also prove to be quite costly. Signing the renewal offer from your lender without bothering to check if there are better options is tantamount to dumping a bunch of money into the trash.
We can review your renewal package the lender has sent you and provide advice as to if there are potential savings to be made moving elsewhere.
Switching Your Mortgage To A Different Lender
While not as simple as renewing your mortgage, switching to a different lender is a fairly easy process. Unlike renewing with your current lender, you’ll be required to re-qualify. This involves a new mortgage application, and some basic documentation will be required. The entire process takes approximately 30 days, so you’ll want to ensure you allow enough time.
What happens if your renewal is date is within 30 days?
It is important for us to get going on your application as soon as possible. If we can’t close on your new mortgage exactly on your renewal date all is not lost. We can often let the existing lender know you are moving and put you temporarily into an open mortgage for a week or two while you finish up the approval for your new mortgage. It is important for us to get on top of this right away as some lenders will automatically renew their clients into a closed mortgage. If you miss the window you will likely be stuck in a closed 6 month or 1 year term.
Making changes to your mortgage
Renewal time is a great time re-evalute your financial situation as well. Since you won’t have a penalty with your current lender it can be a good time to refinance if you want or need to. We can look at options such as consolidating higher interest debts, adding a home equity line of credit, taking out funds for investment, or renovations.
When Should You Start Exploring Your Renewal Options?
Once you are within 120 days of your renewal date, you can start looking into options. Sometimes banks will send you an early renewal offer up to six months in advance. If you do get an early renewal offer please reach out to us to review it. Sometimes it may be the best option and other times the existing lender may be trying to rush you to sign something without getting a second opinion.
What Are The Costs To Switch Lenders?
This depends on if you are keeping the mortgage the same or making changes. For an insured/insurable mortgage we can often get legal and appraisal fees covered by the new lender as long as the mortgage amount and amortization aren’t changed. If you are doing a refinance, an appraisal may be required to confirm the equity in the home and lawyers fees may be incurred to register the new mortgage and different loan amount on the title of your house. These fees can often be incorporated into the new mortgage amount.
What Happens If You Don’t Qualify?
If you have lost your employment, recently declared bankruptcy, or anything else that might create issues with qualification, then options for switching lenders will be limited. You can however renew your mortgage with your current lender without the need to re-qualify.
Conclusion
It’s best to stay on top of things with your mortgage renewal date. Maybe put a reminder in your calendar to reach out to us 120 days prior to your renewal date. You can count on us to look at options be they staying with your current lender, switching to a new lender, or refinancing your mortgage to access your home equity.