When your mortgage comes up for renewal, the lender may offer a new rate and term. If rates are higher than when you first borrowed, the payment may rise, especially if your balance is still large. You do not need to accept the first offer without reviewing it, but leaving the decision until the last minute can limit your choices.
Start reviewing six months before maturity
Begin by finding your maturity date, current balance, interest rate, remaining amortization and any renewal instructions from your lender. A review about six months ahead gives you time to compare the renewal offer with other available options and ask questions before your term ends.
Ask your current lender for its offer, but also consider whether another lender may have a better fit. A lower rate is important, but compare the full terms too: payment frequency, prepayment privileges, portability, penalties and whether the mortgage is open or closed. The right choice depends on how long you expect to keep the home and whether you may need flexibility.
Understand the payment and your options
Estimate the payment at the proposed rate using your remaining balance and amortization. If it is higher than your current payment, test that amount against your monthly budget now. Look for expenses you can adjust, but do not base the decision on an unrealistic budget that leaves no room for repairs, savings or other changes.
If the new payment is difficult, ask what options are available. Depending on your situation and the lender, you might discuss changing the amortization or adjusting payment frequency. Extending the amortization can lower payments but may increase the total interest paid. Refinancing to borrow more or change the loan substantially is different from a straightforward renewal and can involve new qualification requirements, costs or penalties.
Compare carefully before you sign
- Check whether the offer is guaranteed for a set period and what happens if rates change.
- Ask about any fee or penalty for transferring before maturity.
- Confirm whether a new lender needs documents or a property appraisal.
- Get the payment, rate, term and key conditions in writing.
Mortgage rules and lender requirements can differ, particularly if you are changing the loan rather than simply renewing it. A renewal review well before maturity can make the choices clearer and give you time to act. If your renewal is coming up, get in touch with Keystone Mortgage Advisors to review your options.
This article is general information, not financial advice, and it may not reflect the latest rules or your own situation. Talk to Keystone Mortgage Advisors about your circumstances before acting on it.