With all the hubbub these days about “the mortgage renewal cliff”, I thought I’d chime in with an easy to understand myths versus facts on mortgage renewal, and what your steps should be on how you approach your renewal.
If your mortgage is coming up, don’t stress about it. Instead, just read this. Once you’re through, you’ll be much calmer and you’ll have a plan of action.
And honestly, this isn’t a “just call me” type of article. Gather the information, then decide if you want to call me, your bank, or another mortgage professional.
Your mortgage is amortized over a long period of time. Essentially, the rate increase is spread over the next 25 or 20 years of your mortgage.
Yes, rates are higher than they were 5 years ago. But the increase is not as dramatic as the headlines make it sound.
Now let’s separate myth from fact.
Don’t panic about qualifying. If you aren’t making any changes, you don’t need to re-qualify, you’ll just need to negotiate the rate with your lender and eventually sign the renewal on the agreed upon rate.
If you need to borrow more money from them, or extend the amortization back to 25 or 30 years, then you’ll have to start a new application.
Requalifying and negotiating is where I step in. I help you find out if your existing lender can approve the amount you’re going to ask for, and I can also determine any other lenders that could approve your request.
As a mortgage broker, I can help you figure that out. I can tell you what other lenders are offering for rates, and I can even help you negotiate your rate with your existing lender (I tell you what to say to them).
And if the end result is that you stay with your lender, great! I’ll ask you for some referrals and a Google review. I help so many people without actually getting paid. It’s part of my job.
They’ll usually start contacting you about 6 months before your renewal date, and they’ll may make you nervous about rates going up, guaranteed. More below about renewing early (in myths).
On rates – at this point it looks like rates are holding steady or maybe even going down. Which tells me that its better to wait until closer to your renewal date to lock in a fixed rate (with your lender or with another lender).
There’s some strategy involved here, which I can help with.
Nope!
When your lender tells you that you can renew 6 months early, that only means that you can renew with THEM 6 months early.
You can’t change the mortgage to a different lender, unless you pay the 3 month interest penalty. With 6 months left to go, no one wants to pay a 3 month interest penalty.
So if I’m dealing with your renewal, we will usually payout your lender on the day of renewal, and not earlier, unless you really need to. We want to avoid any penalties.
You may want to use your equity to:
If you’re any of the above you really should call a mortgage professional, or your lender, to discuss your options.
You aren’t really talking about rate until you know if you are just renewing, or not.
I’ll lay out all your options, and let you know if I think it’s worth it to ask your existing lender. No obligations here, I’m happy to help you work out your options.
As I said before, I help lots of people just in that first 15 minute conversation. Unless I’m really adding value by qualifying you for more money, or negotiating a much better rate with a new lender, I step aside.
Simple. Ask your lender for their absolute best rate on the term that you want. Not sure if you want fixed or variable? Well, you can call me and we can discuss that too.
I can tell you if I think we can get something much better, or I’ll tell you to take the offer.
Easy peasy. That extra 15 minutes on the phone with me can help you secure a much lower rate.
The “mortgage renewal cliff” makes for good headlines. But for most homeowners, this is simply a decision point — not a crisis.
Don’t panic.
Understand your options.
Make a plan.
And yes — call someone.
If that someone happens to be me, I’ll give you straight advice. Whether that means moving your mortgage or staying exactly where you are.