Today, many people take advantage of various mortgages to acquire their dream houses, even when they do not have enough funds. A mortgage is simply a form of loan received by a person from a lender, often a bank, to purchase a house or property. These loans are paid back over an agreed period, either with a fixed or flexible interest rate. Repayment is either spread out monthly, weekly, or some months time. Mortgage services have made property purchases easy for many Canadians today.
But there are some important details to note in a mortgage. One of those is mortgage renewal. Mortgage renewal is one of the many aspects of mortgages. Some others include mortgage refinancing, equity take-out, and many others. But for mortgage renewal, the main contention is about its benefits and disadvantages. Many people think that renewing your mortgage isn’t as beneficial as professionals portray it to be, because it simply extends your debt to the lender. While some others are ignorant of the benefits of mortgage renewal and thus do not pursue this option available to them.
Therefore, to demystify the notion of mortgage renewal, this article will highlight some advantages of renewing your mortgage early.
What is Mortgage Renewal?
As the name indicates, mortgage renewal involves the extension or restoration of a mortgage. Mortgage renewal is the process of extending the terms of your loan after the expiration of the current loan with you unable to completely pay off the loan. This means that renewal happens under two conditions: when you are unable to pay off your mortgage at the agreed time and when the current term of your mortgage is up. This happens, especially when you do not have funds to repay your loan, and the best option available to you is to seek a mortgage renewal.
Therefore, mortgage renewal is the act of restoring the mortgage on your house to give you a longer period to pay off your loan. This renewal allows you to renegotiate the mortgage terms, such as the interest rate, payment frequency, and length of the term. In other cases, a mortgage renewal allows you to maintain the same details of your mortgage and simply extend the length of the term.
The Mortgage Renewal Process
The mortgage renewal process is fairly simple. Often, before the end of your mortgage term, if you are unable to pay off your loan in full, your lender sends you a notice that you can renew your mortgage. So, you can either renew your loan for a new term with your current lender, where you can maintain the same loan conditions and rate, or renegotiate new terms and conditions.
You could also search for a new lender to offer you a lower interest rate and a shorter term. This offers you new opportunities with a new lender. But more importantly, it offers more time.
The Pros of Early Mortgage Renewal
In mortgage renewal, the period you renew your mortgage is just as vital as renewing the mortgage itself. There are periods of mortgage renewal, which indicate when a person renews his/her loan. These periods include early and late mortgage renewal.
Early mortgage renewals refer to the process of renewing or extending your loan before your current mortgage term ends. It is done in anticipation of the end of a mortgage term and with the knowledge of ones’ inability to pay off in full before it ends. At the same time, late mortgage renewal refers to when an individual renews his/her loan after the current mortgage term has ended. Each type has its own benefits and disadvantages. But for this discussion, we would focus on early mortgage renewal.
Although the pros of early mortgage renewal vary based on the situation; amount owed, time left, and interest rate. But here are some benefits of renewing your mortgage early.
Renegotiation of Terms
One major advantage of early mortgage renewal is that you have adequate time to carry out your research. Adequate market research allows you to go to the negotiating table full armed with the possibility of having a better outcome.
So, early mortgage renewal allows you to renegotiate your loan terms. Due to proper research, you would know the current rate in the market. You would know if the current market rate is lower or higher than your existing loan interest rate. And if the market rate is low, you can decide to renegotiate a lower rate with your lender while renewing your mortgage even before your current term ends.
Early mortgage renewal also allows you to change lenders effectively. Often when you want to renew your mortgage, it is advisable to scout for other lenders with good interest rates. Rates that are lower than that which your current lender offers you. Sometimes, you might not end up using these other lenders, but it gives you a negotiating power at the table with your current lenders if they want to retain you as a client.
Proper research when you plan for early mortgage renewal offers you the opportunity to meet other lenders, scout, and make the best choice for your renewed mortgage. This choice can significantly affect your ability to pay off these loans during the loan term and the rates you get.
With early renewal, you have the opportunity to lock in rates. This means that there might be a sentiment or rumour in the market that interest rates are about to increase. Renewing your mortgage when rates are high means that you will be paying more than your current mortgage. In this instance, you can lock in rates at a lower price by renewing early.
You lock in your renewed mortgage at a lower rate than the future high rate.
Although some might argue that early mortgage renewal has its disadvantages, we can see from the points stated above that it greatly benefits the individual. Renewing a mortgage is beneficial to individuals who cannot pay off their loan in full. But early renewal accords you more benefits as you have enough time to research and make the right choice for your mortgage.
Hope now you know why early mortgage renewal is good in Canada. Visit our website Best Mortgage Online for any help related to Mortgage, Home Finance in Canada