Many homeowners dread mortgage renewal time, especially when interest rates are rising as they are today.
It means you’ll likely be resetting your mortgage at a higher rate, with higher monthly payments.
But as always, you have options. Should you renew early to avoid even higher rates? Or perhaps refinance to lower your monthly payments?
We’ll answer these questions and more to ensure you can face your next mortgage renewal with confidence.
How early can I renew my mortgage?
You’re generally advised to start thinking about your mortgage renewal at least six months before the end of your term. This ensures you have ample time to speak with me about your situation and shop around if you’re not happy with your current lender’s renewal offer. That said, some lenders allow you to renew early by as much as six months. That means, depending on the lender, we can start the process and secure your rate as much as 10 months out, which could be very valuable if rates continue to increase.
Should I renew early to beat rising rates?
If you’re hoping to lock in at today’s rates early—more than four months in advance of your renewal date—to beat any further rate increases, you could face a prepayment penalty for terminating your contract early if the lender doesn’t have an early renewal option. In this case, we’ll need to do the math to ensure the move makes financial sense.
Should I accept my lender’s renewal rate offer?
Anyone with negotiation experience knows to research the first offer you receive. While it may be tempting to simply sign the dotted line and avoid further hassle, you’ll potentially be leaving money sitting on the table, with a better renewal rate possible with a little bit of haggling.
Just make sure your lender can’t call your bluff. Due to government regulations, should you choose to switch lenders for a better rate, you will need to be stress-tested at the minimum qualifying rate, which is currently 5.25%, or the rate offered by your lender plus 2% – whichever is higher.
If you plan to shop around, be sure your financial situation hasn’t changed and that you’ll be able to re-qualify with a new lender.
Does it make sense to refinance?
If you are facing a significantly higher rate at renewal and are worried about the increase in your monthly payments, refinancing your mortgage is another option and can be done on your renewal date without penalty in most cases. You’ll be taking out a brand-new mortgage, complete with a new rate, new term and possibly a new amortization period. Extending the amortization can allow you to withdraw funds for renovations, investments, etc., or lower your monthly payments to improve cash flow.
Allow me to help
If you’re feeling stressed about the possibility of your payments increasing or your mortgage is coming up for renewal in the next 12 months, let’s review your options. I’ll be happy to explain all of the above options in further detail and help and guide you through the entire process.
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