What does it mean to renew a mortgage?

What does It mean to renew a mortgage?

When you secure a mortgage, you probably never thought about the renewal process as there is a lot of paperwork involved in getting approval for a mortgage. 


You have signed your mortgage papers by agreeing certain terms on your loan like interest rate, period of mortgage etc. 

The renewal of a mortgage occurs when your initial terms come to an end and now you can renegotiate your mortgage terms like period of mortgage, interest rate and even lender itself. This gives an opportunity to the borrower to align his mortgage terms according to his needs.

Renew Your Mortgage the Right Way
  The thing is, you have to renew your mortgage after the completion of terms unless you have paid it full. Many borrowers require multiple terms before the mortgage is fully paid.  

Is it worth renewing my mortgage?

Mortgage renewal is an essential part of the mortgage process but some people don’t take it seriously and let their lender decide their mortgage status or set the auto renewal leaving behind a lot of opportunity to save money on the table.   It is worth renewing a mortgage because at each renewal term you get to decide whether your mortgage terms are aligning with your financial goals. You can even shop for mortgage rates in the market and sign up for new terms.   Believe me, a 1% decrease in interest rate on the mortgage renewal process will save you a lot of dollars.  Here are some things that you should consider at the time of renewing your mortgage

1. Your Net Income

The probability is that your net income will be much better now as compared to the time you have bought the mortgage. So, while signing new terms you can ask the lender to increase your monthly payments and this way you will get debt free fast.  The other side of the coin is that your expenses have increased now because of children or any other reason then you can lower your monthly mortgage payments and live your life comfortably. 

2. Your Financial Goals

While renewing your mortgage, you should also consider your financial goals as well and the mortgage product that your current broker is providing supports your financial goals.  To cite an example – If your current mortgage term is for 6 years and the next mortgage renewal terms will likely be 6 years too but what if you are moving to another city within the next two years. In that case, you can opt for a two year mortgage product.  Another thing you can consider is HELOC – Home equity line of credit as your home also increases in value and has equity build up into it which can be utilized to lower mortgage rates. 

3. Shop for Mortgage Rates

Another thing you can do while renewing your mortgage is to shop for better rates. You can negotiate with your existing mortgage institute or shop for new mortgage rates in the market.  Suppose you have a mortgage of 300,000$ for 20 years and on a 2.74% interest rate your monthly payments will be $1,595.56 whereas on 2.94%, it will be $1,652.13.  The 0.20% cut in interest rates will save you around 57$ a month or 684$ a year.  If you are looking for the best mortgage renewal services at best rates, then do give us a chance. 

4. Start Shopping Early

“Early bird gets the worm” this phrase fits well when you are looking to refinance your mortgage. While your existing mortgage broker will send you the refinance notice 30 days prior, it is advisable that you start shopping for mortgage rates at least 120 days before the date of renewal.  This gives a chance to the other mortgage broker to do the paperwork and you get enough time to shop for best rates available in the market. You can find your maturity date on the mortgage contract and act according to it.  

5. Look for a Good Lender 

If you decide to switch lenders then, It takes time to find a good lender. So, you should start looking for lenders as soon as possible.. 

Is renewing your mortgage the same as refinancing?

Renewing and refinancing a mortgage are two different things. In mortgage renewal, the borrower can renew the old terms of the mortgage and set new terms on the pending loan. 

On the other hand, in refinancing all your debt is consolidated and a new loan is issued which replaces the old loan. Refinancing helps you in accessing the hidden equity of your house or to get a better rate. Refinancing is helpful to homeowners to merge these high interest debt into a manageable secured debt. This will help if you are doing home renovation or paying your kids to college. 

How early can a mortgage be renewed?

Your mortgage broker will send you a mortgage renewal notice 30 days prior to the date of your mortgage renewal but you should start shopping for new mortgage products as early as possible. A 90 day period will be good for early renewal of your mortgage. 
You are qualified to renew your mortgage loan as early as 4 months or 120 days before maturity. This is also skinwn as early mortgage renewal and many lenders offer discounted interest rates on early renewal of mortgages.

Do banks check credit for mortgage renewal?

If you are renewing your mortgage terms then banks or private mortgage lenders don’t check your credit score unless you are not changing something important like terms of loan or any recent changes happening in your financial situation like you are unemployed etc.  Otherwise banks do not check your credit report and refinance your mortgage. For submitting a mortgage renewal request to a new lender you need following documents:-

  • Mortgage renewal letter copy
  • Income proof 
  • Proof of home ownership 
  • Property insurance proof

It may take a mortgage lender a week to view your application and suggest you the best mortgage product. Starting early will give you time to compare the different terms otherwise you will sign your mortgage application with your old lender on the same terms.