Getting your first mortgage can be an involved process. You have to provide proof of income, proof of employment, have your credit bureau run, have a down payment, and so much more. By the time everything is approved you feel a weight off of your shoulders and move on to the process on getting ready to move and arranging everything else you need for your new home. One thing you might not think about is, "what happens when it's time to renew?"
Once you've reached the end of your term, which is often five years, you need to renew your mortgage for another term, or pay it off.
After we bought our first home, my husband and I had no idea what to expect when it was time for renewal. Did we need to contact the bank? Would they contact us? Would it be the same involved process of looking into our financial situation? I started to feel stressed about what was ahead.
What actually happened was so much simpler than I imagined. A letter came from the bank a couple of months before the renewal date, asking us to book an appointment with our local branch. A new mortgage commitment was ready to go and after a quick look at the new rate, with a mortgage payment that stayed virtually the same, all that was needed was a signature and the mortgage was dealt with for another five years. No review of the finances, no new information needed, nothing. Granted, we hadn't missed a payment in that time and nothing had really changed for us, so there shouldn't have been any red flags.
Although we were happy to continue with our lender and the status quo, there are things you might want to consider as your mortgage comes up for renewal.
What Are Your Financial Goals?
Does your budget allow you to increase your payment to pay down the mortgage faster? See what options you have for doing that. Are you considering moving within a few years? Maybe a 3-year term would be more appropriate so you're not paying to break a 5-year term early. Do you need extra money? Look into a refinance or a Home Equity Line of Credit. These are things that you need to consider prior to renewal.
You may be happy to stay with your current lender and take the terms they offer. However, many people prefer to shop around and look for a better rate, or for a lender that better suits their needs. Do research online, talk to lenders, find out what other options are available to you. Meeting with a mortgage broker is a great option because they have access to a variety of lenders, meaning a variety of interest rates and a variety of products. Mortgage brokers are also willing to offer you advice at no charge and can help you get a better understanding of the mortgage renewal or switch process.
Get Started Early
Don't wait until a few weeks before your renewal date. Start researching early. Talk to your current lender and see if they can provide you with a better rate or provide you another product to reach your financial goals. Ask. If you don't ask for something, your lender is not going to magically give it to you. If you're thinking of switching your mortgage to another lender, get the ball rolling as soon as possible. Keep in mind, if you want to switch lenders you will have to submit a new mortgage application with all the documentation that requires.
The bottom line is that renewing your mortgage can be quick and easy. There's no need to stress. However, if you want to make sure you are getting the best rate and have the best product for your situation, talk the time to shop around and do some research.
For more information about renewing your mortgage, check out this link.