Navigating your mortgage renewal this season

Is your mortgage renewal time approaching? If this is your first experience with renewals, you are likely wondering what you should expect. Renewing your mortgage in 2023 will be a bit different than past years. Here are the key facts to know as you head into this process!

How is a renewal different from a refinance?

People sometimes get confused when trying to differentiate between a mortgage renewal and a refinance. A refinance is an optional action home owners can take if their current mortgage product is not serving their needs anymore. Many home owners find their situation evolves over time and they would benefit from a change in their product. A renewal, on the other hand, is when that mortgage term reaches its end and must be renewed. Many mortgage terms last for five years, for example. Once those five years are up, it’s time to renew!

What are your renewal options?

Right now, many home owners are choosing to lengthen their amortization period when they renew their mortgage, essentially refinancing. This will stretch out the mortgage term so home owners can make lower payments each month in order to limit short-term financial stress. Of course, this means home owners will be paying off their mortgage for a longer period, but it helps them manage their finances more comfortably in the meantime. 

Sometimes, home owners decide to renew with a different mortgage lender. Once your mortgage term ends, you do not need to stay with your current lender. Of course, people who are happy with their lender and product often stick with their existing lender. However, it’s important to consider all your options, especially if you’re unsure as you approach renewal time. Your broker can help you determine whether a different lender or product may work better for you.

Prepare for higher rates

In the past, home owners may have been able to renew their mortgage at a lower interest rate. Unfortunately, rates are higher today than they have been in quite some time, so home owners should expect to renew at a higher rate than they currently have. This means your monthly mortgage payments will increase. While this can feel stressful, it’s important to remember that interest rates are constantly changing. If you have a variable-rate product, your mortgage rate will decrease once interest rates start going down once again. People who currently hold a fixed-rate product may want to consider switching to a variable rate in anticipation of the rate drops we may experience within the next year.

Mortgage renewals are something every home owner will encounter, but each renewal experience is still unique. Your individual situation and needs will help you and your mortgage broker determine what you need come renewal time. If you are approaching your renewal period, you can reach out to your broker now to start discussing your options!

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.