5 Key Tips for a Smooth Mortgage Renewal

1. Plan for your mortgage renewal well in advance

1. Plan for your mortgage renewal well in advance

When it comes to renewing your mortgage, timing is key. That’s because when you plan for your renewal before your maturity date, you have the time to research rates, evaluate your financial goals, and compare mortgage products. Mortgage renewal is not something you want to rush as you don’t want to feel pressured to make a decision quickly without all the information.

For instance, if you need to review and adjust your current budget, access alternative sources of income or reallocate part of your savings contributions to compensate for a mortgage payment, you have the time to make these financial moves.

Finally, knowing when your mortgage is up for maturity is the starting point you need. If you’re an MCAP homeowner, you will receive a renewal letter approximately three months in advance. Whatever lender you have your mortgage with, however, it’s a good idea to check on your maturity date so you know your deadline to make a decision.

2. Assess your financial situation

2. Assess your financial situation

Before you begin the renewal process, it’s wise to review your current financial situation. Take a look at your income, expenses, and debt levels to figure out how much of a regular mortgage payment you can comfortably take on. If your budget is tight, consider if there is an opportunity to boost your income through a side hustle or extra hours; if you can consolidate higher-interest-rate debt into a lower-rate option; or if you can reduce any discretionary expenses.

Consider any changes in your life (current or future) that may affect your financial goals and mortgage payments. Events such as career advancements, a tax return or inheritance, an expanding family or a child’s education could all have meaningful impacts on your day-to-day finances.

Having a strong understanding of the mortgage payment you’re comfortable making will help you decide key features of your next mortgage.

3. Review your mortgage agreement

3. Review your mortgage agreement

When was the last time you took a look at your existing mortgage agreement? Renewal is a great time to dust it off and read through it. As you review, consider how the features and conditions fit with your needs and lifestyle – did you feel you had enough flexibility to adjust your mortgage along the way? Did the payment frequency align with your income schedule? Did you have an opportunity to make lump sum payments if you wanted to? Being familiar with your mortgage terms, conditions, and payment details can help you make informed comparisons when exploring new options.

4. Weigh the differences between fixed and adjustable-rate mortgages

4. Weigh the differences between fixed and adjustable-rate mortgages

Was your last mortgage a fixed rate or adjustable rate mortgage? Did you enjoy the stability of a fixed rate, or were you comfortable with the savings opportunities that came with an adjustable rate term? Consider whether you will continue with your current mortgage type or switch to a different one. Becoming familiar with the benefits of a fixed vs. adjustable rate mortgage can help you get comfortable with your decision.

5. Understand your prepayment options

5. Understand your prepayment options

Because mortgage terms are typically a few years long (or longer), life can change between the start and end of your term. Along the way, you may be in a position to pay down your mortgage sooner – perhaps you get a substantial pay increase, receive a bonus or tax return, or inherit an estate. Because you can save a significant amount of interest when you make lump sum payments to your mortgage, you’ll want to understand whether the options you’re evaluating upon renewal offer the opportunity to prepay your mortgage.

Take a look at some smart strategies to accelerate your mortgage payments, and if they’re of interest to you, ensure that your next mortgage provides you with the opportunities to put these strategies into place.

At the same time, you’ll want to understand the consequences that come with paying off your mortgage in full. Is there a chance you’ll be moved out of the country for work? Is your future income uncertain? Knowing what the prepayment penalties are should you need to sell your home and break your mortgage is an important consideration for many homeowners.