Is your mortgage coming due and you are looking at your mortgage options?   When your mortgage is coming due, I would highly recommend speaking to your mortgage broker to shop for a great rate and whether you should refinance or renew.

The expiration of your mortgage term gives you, the homeowner, the chance to make a change to your financial situation and mortgage. Borrowers can choose to renew their current mortgage or refinance it. Both refinancing and renewing offer homeowners benefits that work with their real estate goals, financial goals, and current lifestyle. But homeowners must decipher which one is best for them by learning about the key differences between renewal and refinance.

Refinancing A Mortgage

Refinancing a mortgage is when you renegotiate your current loan agreement. Essentially, refinancing is a new loan that replaces your old loan. Refinancing is typically used to access the equity in your home or to get a better rate. Refinancing a mortgage can help borrowers consolidate their debt and pay off high-interest debts. Credit cards and other unsecured loans carry a much higher interest rate than secured debt, such as a mortgage.

Merging these unsecured and high-interest debts into a single more manageable payment can be very beneficial to homeowners. It offers them a lower interest rate and can assist in saving a little extra money to pay for other expenses. Homeowners that have renovations they’d like to complete or a child going off to university could benefit greatly from refinancing their mortgage.

What about the term?

Moreover, Refinancing isn’t limited to the end of your mortgage term; it can be done at any time! Borrowers can choose to refinance their mortgage before the end of their term but may be subject to prepayment charges. Depending on the savings offered through a refinance with a lower interest rate, the prepayment charges can be relatively small. Borrowers that wait for their current mortgage term to end may be able to avoid prepayment charges.

Renewing A Mortgage

Renewing your mortgage is different than refinancing your mortgage. When a borrower reaches the end of their current mortgage term, whether it’s 3 years or 5 years, and they haven’t fully paid off their mortgage can choose to renew their mortgage. Homeowners will have the option to renew their mortgage multiple times over the life of their loan. It coincides with the length of your mortgage term. Near the end of your current term, you will receive a letter from their lender with an offer for a new mortgage rate and term.

Upon receiving a letter for renewal from their lender, you should consider a few different factors. You should consider the term of your loan, the principal and interest amounts, and the frequency of your payments. This will help to determine whether or not they should simply sign the renewal slip. Reviewing their overall financial position is a great place to start when considering a mortgage renewal.

Do I have options?

A growing family or change in a household income could make renewing seem like a better option. You can choose to go from a variable rate to a fixed rate at the end of your term or change the amount and frequency you pay towards your principal and interest each month. Talking to a mortgage professional near the end of the mortgage term can help borrowers determine the best possible way to save money and pay off the mortgage faster.

Mortgage renewal and refinance can offer homeowners options to save money depending on their lifestyle and current financial situation. Discussing your financial situation and goals with a mortgage professional can help figure out the option that is best for the borrower.

Check out our conversation with our trusted mortgage specialist here.

From your local Real Estate Team at RE/MAX Hallmark Chay in Barrie,

Heather Beauchesne & Mariale Schrobback