Did you know that renewals make up about 11% of mortgage inquiries? That means that over one in ten people that reach out about a mortgage are renewing. Furthermore, if you take into account other inquiry types like mortgage qualification or purchasing (first-time buyer or not), these people will also need to know about renewing in the future.
When you get a mortgage, the contract only covers a specific period of time (the mortgage term) which can range from a few months to five years (or longer). Your renewal occurs at the end of the mortgage term unless you can repay the remaining balance in full. Before renewing, you should evaluate your needs to see if…
- You’re satisfied with the services provided by your lender first and foremost
- You can increase your payments to pay off your mortgage sooner and save on interest
- You want to change your payment frequency or if you’re likely to make additional payments
You don’t have to renew your mortgage with the same lender and can choose another one if they better address your needs and their conditions are better suiting. If you don’t take action, the renewal of your mortgage term may be automatic and will state whether this is the case in the renewal statement that is issued a minimum of three weeks (21 days) before the renewal date.
Are you renewing your mortgage soon?
If you’re due to renew your mortgage in the next few months, you should be calling your lender today. Early renewals are an option that typically costs nothing as long as you aren’t changing anything about the mortgage (e.g. you’re not refinancing). Doing an early renewal will get you the lowest rate today and allows you to hedge against further prime interest rate increases that might occur prior to your renewal date.
Did you recently buy a home?
If you bought a home in the last two years, here’s what you should know for your renewal down the road. First, you’re going to want to start adjusting your budget and your payments to follow the rate increases. Think of it like this, if you took your balance today and went to get a mortgage at today’s rate, what would that payment be? Now, try to adjust your budget incrementally to get to that payment.
Taking this approach will force you to change your budget accordingly and avoid payment shock come the renewal period. You’re also paying off additional principle and less interest in the long run with this route. Last, but not least, it buys you time! You can always change your amortization at renewal to adjust the payment to better fit your budget at that time.
So don’t sleep on it, contact the Kyle Miller Mortgage Agent team if you want to better understand the different renewal options out there and which is best for you!
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