How Long Before Your Mortgage Renewal Date Can You Renew Your Mortgage?
Do you have a mortgage? Did you get a notice warning you of renewal coming up? There is no need to worry. Mortgage renewal gives you the chance to go over what worked and what didn’t in your current mortgage term and lets you improve things for the new term. If you are wondering how long before your mortgage renewal date you can renew your mortgage, it helps to understand what mortgage renewal is all about.
What Is Mortgage Renewal
Mortgages are contracts, and as with most contracts there comes a time where you can renew. With mortgages, your contract is with a mortgage lender and is set up for a certain period of time. This period of time is called a term, and the length of the term can be a few months up to five years or more. You discuss the length of the term with your mortgage lender and put it in the contract. When the end of this term comes up, you will have the chance to either pay off your mortgage or renew it for another term. When you renew, you will discuss the following:
- Any changes or new circumstances
- Remaining balances or principals at renewal time
- Interest rates
- Length of the new term
- Frequency of payments
Before You Renew
There are a few things you should keep in mind before you renew your mortgage. It will seem convenient to sign the renewal notice when it comes, but remember, you may end up having to pay a higher interest rate. Shop around, talk to your lender, and discuss better options.
- Know the difference in Terms: There are a few options available when your mortgage comes up for renewal. You can renew your mortgage for another term or pay the remaining mortgage amount off. Usually, terms are around five years in length, but the length of time is what you decide on. The end of the term is called a Maturity date. Amortization is the amount of time you have to pay your mortgage off, this can usually take anywhere from fifteen to thirty years.
- What about Length: Mortgage renewal is the time to discuss your financial situation with the mortgage broker to see what new rates are available, and what the broker can forecast for different interest rates. Consider if you want to pay off your mortgage early, and if you do it, would that benefit you?
- Know which Rates you want: There are two common types of rates, Variable Rates, and Fixed Rates. Variable rates are designed to adjust with prime lending rates. This means if the rates go down, you can still pay off the mortgage quicker. If the rates go up, you can end up paying more. Variable rates can be riskier than fixed rates. Fixed rates have been proven to help when you need to budget and are also proven to provide security. With a fixed rate, the interest rate and payments will not change throughout the term. It is recommended that you should always ask for a better rate. It may seem like the best idea, and easier, to just renew your mortgage since it is convenient, but the truth is, it probably won’t get the best rate. Ask for a better rate, or shop around for other offers.
- Open or Closed Mortgage: When discussing terms, you will need to choose an Open or Closed Term Mortgage. A closed term has a low-interest rate but has few options. Open terms are more flexible as it allows you to pay off your remaining mortgage in payments of any amount.
You should also consider:
- Personal circumstances
- Financial risks
- Marital status
- Financial goals
How Long Before Renewal Date Can You Renew Mortgage
When you renew your mortgage, the new terms can be locked in as early as 120 days before your current mortgage term ends. Your current lender is required to notify you with time to decide on which options you want for your new mortgage situation. If you can’t get a better offer from your current lender, you may be able to find a new lender in time. Although you may not be able to switch over to the new lender until you reach the renewal date, you still give the lender time to get your paperwork situated. The lender will also be able to give you advice.
It is the law for lenders to send renewal notices at least 21 days before your term ends. Many lenders will let you renew with them within 120 days before the end of your current mortgage term, with no penalties for breaking terms early. This is called an early mortgage renewal.
If you want to change lenders, or even if you want to stay with your current lender, it is recommended that you decide what you want to do 30 days before the date of renewal.
Should you Renew Early?
Lenders may, or may not, allow you to renew early without paying a penalty. Remember not all lenders offer early renewal.
If you are worried about increasing interest rates, you can lock in a low-interest rate by doing this early in your mortgage term, and it will lower the risk of getting a high interest rate when your mortgage term ends. Renewing early can save you money if the renewal rate is lower than your current or future rate. This is actually a beneficial time to renew early. It’s called a “rate increasing environment.” The lender may tell you it’s better to renew at this moment, rather than wait because the future rate could go up.
There is no need to stress or worry over a mortgage renewal. Your mortgage broker will make the process go smoothly and explain things to you as it moves along. Don’t be afraid to ask questions to make sure you get better rates and achieve financial stability. When you get your end-of-term notice, think about renewal. Even if you think you should just sign the renewal right away, make sure to check out all your renewal options before making your choice.