Renewing your property mortgage may turn out to be a painstakingly expensive ordeal if you are not aware of the best tactics. The first step, of course, is to consider how to be as economical as possible. To help you out, experts have come up with some of the best strategies to consider before renewing your mortgage.
With these guidelines, you won’t regret spending your time scanning through the strategies. Of course, it makes sense to compare the best deals and go for the ones that suit your pockets.
This article will help you better understand the process of early mortgage renewals.
When you are near the end of your mortgage term, you need to renew it if you have not completely paid it off. There might be possible changes in the interest rate and term during the renewal of this contract.
Before renewing your mortgage, you might capitalize on certain features that the lender offers to you. In most cases, homeowners benefit from the prepayment allowances of the mortgage.
You may also negotiate with the lender regarding the renewal rate or check out the rates offered by other lenders. In any case, it makes sense to shop around and find the lowest rates in the market.
A typical mortgage takes 20 to 30 years to be completely paid off. This period depends on the amount that a property buyer owes. After you enter a deal with the lender for a mortgage, you need several terms to pay off the debt.
Usually, the length of each of these terms is between 6 to 10 months. In the process, the time is determined to make payments at the desired interest rate. At the end of the term, you need to get the mortgage renewed, as the lender is still supposed to recover the loan from you, and your lender would serve you a renewal statement. You may proceed with the renewal agreement if you find the terms favouring you.
However, there might be times when you might feel that you can get a better deal. For example, the lender might subject you to a credit check during the process to ensure that you are still in good financial condition. If your score is not to their requirements, they might offer you a high-interest rate to compensate.
A statistic reveals that as much as 27% of the mortgage holders in Canada go for an automatic renewal of their mortgages. Unfortunately, this often leads to missed opportunities where they could have made significant savings. To take advantage of the best mortgage features, make sure to follow the approach presented below.
Prudent homeowners start looking for the best deals around four months before the actual time of renewal. This leaves them with plenty of options to go for. After all, doing homework on the best mortgage rates takes time. So never leave the task for the last moment, as you might run out of options and eventually end up paying extra for the entire term.
Start early by comparing the market rates and deals offered by lenders:
- Try to negotiate with your current lender.
- With more time at hand, you can explore the best deals around.
- If necessary, you may think of switching your mortgage lender so that you can save money on your payments.
- Compare Market Rates
Approach multiple lenders to find out the best rates in the market. Examine whether you have been paying interests as per industry standards or at a higher rate. Once you receive quotes from different lenders, compare the deals and opt for those that suit your interest.
If you find that a different lender offers you a better deal, you might consider moving out. However, borrowers should be aware that even though they can make a good saving through switching, they need to shell out an amount to the current lender.
This is required to break the ongoing contract. Therefore, be prudent enough to compare the amount you shell out and the ones you would save in the coming months.
As a homeowner, the responsibility of understanding the mortgage terms lies with you. Take time to comprehend the terms and conditions of each contract fully. This would give you an idea of the outstanding amount and the part of your payments channelized for the principal amount.
This will also help you understand whether you would be able to clear off the mortgage early, dodging the additional fees. At the same time, you would decide whether to go for fixed or variable rate interest.
Often, homeowners find it difficult to compare fees and rates when they go for the new term. Consulting a reputed mortgage broker would be a good idea in this regard. This ensures that you need not reach out to individual lenders to obtain separate quotes.
Instead, an established broker would use your credit report to find the entire list of creditors ready to offer you a deal. Then, when you have a comprehensive list of rates, you can choose the one you believe is economical.
Well, if you had been thinking of making a lump sum payment to minimize the outstanding principal, it would be ideal to do so during the renewal process. Experts recommend setting aside some extra money for the capital, as it would save you a significant amount of interest.
You can save money by renewing early in two ways. Firstly, the rates might decline over time. Secondly, the mortgage rates might increase in the coming months. In the second case, you might lock in the rate when it remains low.
In any case, it would be wise to scrutinize the market and accordingly make your decision. If you are not sure whether to switch your mortgage lender or not, feel free to reach out to the experts. Professional guidance will help you make the right decision.