What happens when my mortgage comes up for renewal?

You took out a 5 year Fixed Rate Mortgage, 4 1/2 years have passed, and you now approach renewal… What happens now?

At the time of first purchasing your home, you shopped for a mortgage. You called your bank, visited a few others, met with a few mortgage brokers, and then, after looking at all of your available options, you made a choice. Hopefully you ended up with a product that cost you the least over the 5 year term selected. But now, nearly 5 years have passed, and your mortgage is coming up for renewal. What happens at renewal time, and what are your options?

When your selected mortgage term ends, your mortgage becomes ‘open.’ An open mortgage has no guarantees, meaning its terms can be changed at any time, but also meaning that the existing mortgage holder no longer has the ability to charge you an early termination payout penalty for paying off the mortgage. Now that you have no penalty for moving mortgages, its time to make a decision; do I move my mortgage, or keep it where it is?

Option 1: Renew your mortgage with your existing mortgage holder

This is what most homeowners find themselves doing at renewal time, even though this can often be the most detrimental. At renewal time, your existing mortgage holder (whether it be a Bank, Credit Union, or Broker Lender) will provide you with a set of renewal options to choose from. There will be variable rate, and fixed rate options with various term lengths to choose from. Just like with cell phone plans, cable, satellite and more, you’re now a returning customer, meaning you often times won’t qualify for certain ‘rate specials’ and programs, so beware. By electing to renew without searching for a better deal, you could end up paying thousands more in interest, and fees over time. Even if you end up choosing to stay with your existing mortgage holder, it would be wise to compare their rates to what is otherwise being offered in the marketplace at the time of renewal.

There are certain types of mortgage products that restrict your ability to move your mortgage from your existing mortgage company to another -even at the time of renewal. However, there are solutions offered by many Broker Lenders that can help you move a mortgage that otherwise seemed locked.

Option 2: Shop for the best deal available

This seems like a no brainer; Just like you did when you first purchased your home, call your mortgage broker (or if you didn’t use a mortgage broker when you initially purchased your home, do this) and find the best deal available. In some cases, your existing mortgage lender may have rate specials only available through your broker, so a simple phone call could see you save serious money –even if you end up staying with your existing mortgage company.

Most mortgage lenders offer renewal switching for free, meaning they will cover the cost(s) of your switch. When its free to move, there is little rationale to justify keeping one’s mortgage with a lender who is not offering the lowest cost option.

Get out there and shop for the best available deal on your mortgage at renewal, and save yourself MONEY

Your mortgage is a product(a HUGE product), and just the way you find yourself shopping for the best deal on each and every vehicle, and home appliance you purchase, you should also take the time to shop for the best deal on your mortgage every time it comes up for renewal. Small differences in rate, user fees, payment calculations, privileges, and more can dramatically affect the overall cost of a mortgage, and you would be wise to shop around at renewal, just as you did when you first purchased your home.