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If you’ve got a mortgage that’s renewing soon and this is the first time you’ve come to the end of a mortgage term, you have a few options ahead of you, and likely just as many questions! Regardless of how long the mortgage term is and assuming you don’t plan to pay it off in full, you’ll be presented with two choices: renew or refinance. Learn more about the differences so you’re prepared to make the best choice for you when the time arrives.
Option 1: Renewing Your Mortgage
To keep it simple, renewing your mortgage means you’ll agree to stay with your current lender. Typically, terms and conditions will stay the same with the exception of the interest rate which could change. If you’re happy with your current mortgage and you’ve done your research and found you’re indeed still getting good value for your money, you might not have a reason to change directions.
It doesn’t cost any money to renew your mortgage but it never hurts to shop around to make sure you aren’t missing out on any better deals. At this point in the process, it’s also wise to ask about interest rates and how you can pay your mortgage off faster so any necessary adjustments can be made prior to moving forward.
Option 2: Refinancing Your Mortgage
Refinancing is all about renegotiating your agreement so that it works better for YOU. Refinancing can take place at any time during your mortgage term and doesn’t require waiting for a specific renewal period to come around. Penalties may apply for choosing to refinance prior to the end of your term so it’s wise to inquire about the fee structure before making any decisions. There are a few reasons why you may consider refinancing:
1. You want to lower your monthly payments by creating a new mortgage with a lower rate and a new amortization period.
2. You want to borrow some money (i.e. to cover large expenses or consolidate your debt) and add it to the amount you currently owe on the mortgage.
It’s also important to note that some fees will apply if you choose to refinance your mortgage either at the end of your current term or midway through. You will incur a small mortgage registration fee and you’ll also have to pay for legal, appraisal and mortgage discharge fees. A mortgage specialist can help you estimate the total cost for these expenses so you’re prepared in advance. If the cost of refinancing is less than the amount of money you could save, then this might be the best choice for you.
It’s so vital to review all your options, especially when it comes to mortgage renewals. Whether the right choice for you is obvious, or you’re still weighing the pros and cons, Rocket Mortgage can help put things into perspective and provide the insight you need to make the right decision for your current needs. Contact us to learn more about how we can help!