Top 5 things to consider when your mortgage is up for renewal.
Today I want to share the top 5 things for you to consider when your mortgage is up for renewal. Now you’re probably guessing that interest rate is number 1, and while the interest rate is important, I want you to consider these other factors as well.
What is the remaining amortization on your mortgage? Chances are that your monthly income has changed since you first took out your mortgage.
Is there room in your monthly budget to increase your payments to help pay your mortgage off faster?
What does the next 5 years look like in your current home? Does a term of less than 5 years make more sense?
Let’s talk about insurance. If you have life and/or disability insurance, will you need to reapply if you move your mortgage to a new lender for a better rate? Something to consider if your health has changed in the last 5 years.
Interest rates have certainly changed over the last year. Maybe you’ve always had a fixed mortgage, but forecasts are that interest rates will fall over the coming 18 months. And once you’ve taken all of the other factors into consideration, lastly is finding the best interest rate that fits with your needs.
When your lender reaches out before your mortgage is up for renewal, and you accept the current rate options presented, you are now locked in at the rate and you forgo your previous rate for the balance of the original term. So if your current interest rate is 3% and your mortgage renews in May, if you renew early your new rate takes effect today and you miss out on the extra 4 months of your previous rate of 3% and depending on your mortgage size the difference can be significant.
However, when you look at switching to a new lender, they will hold today’s rate for you for 120 days in time for your mortgage to renew, and should interest rates go down, they will adjust their rate to match and if they go up, you have already secured the best rate AND you don’t lose out on the previous rate you had for the extra time.
We’ve seen fixed rates start to come down over the last couple of months, so for some it might not make sense to renew early. Where interest rates will go is a hot topic, but so is saving money.
So here is my challenge to you. If your mortgage is up for renewal, email me a copy of your current mortgage statement and let’s see what your best options are for renewal.