How Early Can You Renew Your Mortgage?

29 Mar How Early Can You Renew Your Mortgage?

A mortgage is one of the biggest and most significant financial commitments you will make in your life. Managing your mortgage requires careful planning and consideration. One of the important considerations that homeowners need to make is when they can renew their mortgage. 

Mortgage renewals are a significant financial commitment that can impact your financial stability for years to come. It’s essential to understand the factors that can affect the renewal process, including interest rates, term length, and lender policies. By doing so, you can make informed decisions and manage your mortgage effectively. Here’s what you need to know: 

Mortgage Renewal Date

Homeowners must renew their mortgage at the end of each term. If you have a 5 year mortgage then you renew your mortgage just before the end of that term. However, homeowners can renew their mortgage early, and there are many reasons why they might consider doing so. Some homeowners may want to lock in lower interest rates, while others may need to change the terms of their mortgage because their marital status recently changed or to better suit their financial goals. 

How Early Can You Renew Your Mortgage? 

The answer depends on several factors, such as your current lender, your mortgage agreement, and your financial situation. In most cases you can renew your mortgage up to 120 days before your current term expires. This period is known as the renewal window. During this time, you can explore other lenders, current mortgage rates and can negotiate a new mortgage rate and term with your lender without having to pay any penalties.

If You Renew Your Mortgage Early

If you renew your mortgage outside of the official renewal time, there are penalties, such as a prepayment charge or higher interest rates. These penalties vary depending on lenders and the terms of your mortgage agreement. Therefore, it’s essential to read the fine print of your agreement and speak with your lender or mortgage broker to understand any potential penalties before you decide to renew your mortgage early.

Change in Financial Situation

Another factor that can affect when you renew your mortgage is your financial situation. If you’ve experienced a significant change in your income or expenses, you may need to renew your mortgage early to adjust your monthly mortgage payments. 

For example, if you’ve lost your job or experienced a pay cut, most lenders will work with you to renew your mortgage early to lower your monthly payments.

Early Mortgage Renewal – Factors to Consider 

Renewing your mortgage early can have advantages and disadvantages. Work with an experienced broker when considering your mortgage renewal options. Here are some factors to consider when deciding if you want to renew your mortgage early:

Current Interest Rates 

One of the main reasons homeowners consider renewing their mortgage early is to take advantage of lower interest rates. If current interest rates are significantly lower than the rate on your current mortgage, it might make sense to renew early to lock in a lower rate and potentially save money on your monthly payments.

Financial Goals 

Consider your financial goals and think about whether renewing your mortgage early can help you achieve them. For example, if you’re planning to retire soon, you may want to consider changing your payment frequency or a shorter mortgage term to pay off your home before you retire. If you’re looking to lower your monthly payments to free up cash flow, you might consider a longer mortgage term.

Penalties 

You might like the terms that a new lender can offer you but before renewing your mortgage early, be aware of any penalties that may apply. These could include prepayment penalties or higher interest rates. Make sure you understand the costs of renewing early and weigh them against the potential savings.

Credit Score 

Your credit score can impact your ability to renew your mortgage early. If your credit score has improved since you first took out your mortgage, you may be able to negotiate better terms, such as a lower interest rate. However, if your credit score has decreased, you may face higher interest rates or be denied renewal altogether.

Mortgage Type 

Consider the type of mortgage you have and whether it’s a good fit for your current financial situation. For example, if you have a variable-rate mortgage and you’re worried about interest rate increases, you might consider switching to a fixed-rate mortgage.

What Does The Amortization Period Mean? 

The amortization period is the total length of time it will take to pay off your mortgage loan in full, including interest. It is typically measured in years, a long amortization period can be 25 or up to 30 years. The mortgage maturity date is the exact date the borrower will make their final mortgage payment on a house. 

During the amortization period, you will make regular payments that include both principal (the amount you borrowed) and interest (the cost of borrowing the money). The amount of monthly mortgage payments depends on the size of the mortgage, interest rates, and the length of the amortization period.

For example, if you have a mortgage of $300,000 with a 3% interest rate and a 25-year amortization period, your monthly mortgage payment would be around $1,419. Over the course of the 25-year amortization period, you would make 300 payments, gradually paying off the principal and interest until the mortgage is fully paid off.

It’s important to note that the longer the amortization period, the lower your monthly payments will be, but the more interest you will pay over the life of the mortgage. A shorter amortization period will result in higher monthly payments, but you will pay less interest overall.

Choosing the right amortization period for your mortgage depends on your financial situation, monthly expenses and goals. A shorter amortization period can help you save money on interest and pay off your mortgage faster, but it also means higher monthly payments or more frequent payments. A longer amortization period can result in lower monthly payments, but you will pay more interest over the life of the mortgage.

Early Mortgage Renewal & John Antle 

When dealing with mortgage renewals, you can rely on the expertise of John Antle. We help you understand the renewal window, potential penalties and help you make an informed decision about when to renew your mortgage, whether to switch lenders, and we negotiate the best terms with your lender.

Whether you are looking for pre-approved mortgages or renewal options, an experienced Kelowna mortgage broker can help you find the best mortgage product for your needs and goals. Contact John Antle today!