If you’re concerned that interest rates will increase, locking in a low-interest rate early on will help reduce the risk of having a higher interest rate when your mortgage term is up. If the renewal rate is lower than your current rate or the anticipated future rate, renewing early can potentially help you save money.

When should I renew my mortgage?

By law, your lender has to send you a renewal notice 21 days before your term is up, but most allow you to renew with them anytime in the final 120 days of your current mortgage term, without having to pay a penalty to break your term early; this is known as an early mortgage renewal.

Do mortgage payments decrease when you renew?

“At renewal a borrowers mortgage balance is lower, and it’s likely that the borrowers household income has increased as well.

What does it mean to renew a mortgage?

A mortgage renewal is when your current term comes to an end and you sign on for a new term. This is an opportunity for you to renegotiate the terms of your mortgage contract, including the length of your next term, your mortgage interest rate, and even your lender.

What is the penalty for ending a mortgage early?

As we mentioned earlier, the penalty for breaking your existing mortgage is equal to three months worth of interest, or $1,881. In addition, you would pay about $1,000 in administrative costs. So after the penalty and the admin costs, you would save $11,286 over five years. Is that worth it?

What is the difference between renewing and refinancing a mortgage?

At the end of a five or ten year deal, if the loan has still not been fully paid off, you can opt to simply renew the deal and pay off the loan at the previously agreed upon rate. Refinancing is different. Refinancing essentially means that you are swapping your current mortgage deal for a different one.

What happens during mortgage renewal?

Just before your term expires, your current lender will send you a renewal offer in the mail. The offer will include a new mortgage rate, typically for the same length of time as your current term, as well as a slip that you can sign and send back. While this might be convenient, it doesn’t mean you’ll get approved.

Is renewing your mortgage the same as refinancing?

Renewing A Mortgage Renewing your mortgage is different than refinancing your mortgage. It coincides with the length of your mortgage term. Near the end of your current term, you will receive a letter from their lender with an offer for a new mortgage rate and term.

What should I do before renewing my mortgage?

Take time to review existing interest rates as well as your current job and family situation before renewing a mortgage. You may find that negotiating different terms or switching to a different lender for mortgage renewals not only saves you money, but could significantly reduce the term of your mortgage. Be prepared.

Can you get a lower interest rate when Renewing Your Mortgage?

You may qualify for a discounted interest rate that is lower than the rate quoted in your renewal letter. When you negotiate an interest rate, tell your lender about offers you’ve received from other financial institutions or mortgage brokers. If you don’t take action, your mortgage may automatically be renewed for another term.

Do you have to renew your mortgage with same lender?

Most homeowners renew their mortgage with the same lender that holds their current mortgage. That’s not a big deal on the face of things, although a 2015 mortgage consumer survey found that more than half of homeowners renewed their mortgages without negotiating different terms than those that were presented to them in their renewal statement.

What should be included in a mortgage renewal statement?

A renewal statement must contain the same type of information that is in your current mortgage contract, such as: the balance or remaining principal at the renewal date The renewal statement must also specify that the interest rate offered in the renewal statement won’t increase until your scheduled renewal date.