3 Common Mortgage Renewal Mistakes and How to Avoid Them

Mortgage Renewal Mistake #1: Waiting until the last minute

Mortgage Renewal Mistake #1: Waiting until the last minute

Solution: Start thinking about your renewal early and do your research

While your lender has to reach out at least 21 days before your mortgage term ends, you don’t have to wait to start planning ahead for your renewal. Set a reminder in your calendar 3 to 4 months before your mortgage term comes to an end. That will give you time to research what’s going on in the market, what rates you can expect and calculate your potential mortgage payments.

If you’re an MCAP homeowner, we’ve created a handy mortgage renewal checklist to help you prepare for your renewal.

If you don’t accept or negotiate the mortgage renewal offer provided by your lender, your mortgage may renew automatically. Different lenders have different guidelines for automatic renewals but often times this will mean your mortgage renews for a shorter term with a higher interest rate.

Mortgage Renewal Mistake #2: Keeping the exact same mortgage terms

Mortgage Renewal Mistake #2: Keeping the exact same mortgage terms

Solution: Examine your current financial status and choose a mortgage that works for your current situation

A lot can change in five years. When you were deciding on the details for your previous mortgage term, perhaps you had a different income, or your debt load has changed. These are all things to take into consideration when it’s time to renew your mortgage and select new mortgage terms.

Here are some things to consider when deciding what your next mortgage will look like:

• Income: Is your income higher or lower? If you’re earning more now, are you able to afford a higher mortgage payment and potentially pay off your mortgage faster?
• Payment Frequency: If you originally had monthly payments, you could try a more frequent payment schedule. This is another way to gradually pay your mortgage off faster, too.
• Fixed or Adjustable Interest: The right interest rate type will vary significantly from homeowner to homeowner. Just because you chose a fixed or adjustable rate in the past doesn’t mean you have to stick with that option again.
• Access to Home Equity: If you have high-interest debt or have other financial goals you’d like to tackle, could using some of the equity accumulated in your home help you achieve them?

Your mortgage renewal is a great time to look at the bigger picture of your finances and make sure your next mortgage is helping you achieve more of your financial goals.

Mortgage Renewal Mistake #3: Only focusing on rates

Mortgage Renewal Mistake #3: Only focusing on rates

Solution: Consider all the features of your next mortgage like prepayment and lump sum privileges and fees

Mortgage interest rates are an important factor when finding the right mortgage for your needs – but it’s not the only factor you should consider when it’s time to renew. Take a look at the other mortgage features being offered to see what is the most beneficial for you. If you’re looking to take advantage of prepayment or lump sum payment privileges in the next few years, make sure that’s included in your next term. Pay close attention to any associated fees in your next mortgage term too.