Significance of an Early Mortgage Renewal
As per rules, your lender will send you renewal form 21 days before the term is over. However, most of the lenders allow you to renew your mortgage anytime during the final 120 days of your current mortgage term coming to end, without any need to pay penalty. It is known as an early mortgage renewal.
An early mortgage renewal offer let you lock in new rate two to three months before the maturity of current mortgage term. If you lock in the mortgage offer offered by current lender, you may overcome the risk of adverse rate movements, but then you will pay the premium at the best available rates and you will also lose all benefits if the rate drops before your term is over.
The decision for accepting early mortgage renewal should be predominantly based on the interest rate that is being offered. You must shop around with other lenders to find the lowest rate available in the market. You will surprised that shopping around can actually save you thousands of dollars. For instance, if current lender is offering early mortgage offer for 3.39 per cent, while another lender in market is offering fully featured five-year fixed rates at 3.29 per cent or less, then it will be better to switch the lenders. Thus, an early mortgage renewal allows you to do the following:
- Review the terms and conditions laid down in the current mortgage contract
- Compare the rates and terms and conditions of the current mortgage along with what is currently available in the market
- Negotiate a lower rate for your next term, in case you choose to stay with current lender
- Capitalize on current rates before they rise
If you’re planning to live in your home for next five years and you don’t think you need to break your mortgage or refinance, then there is no harm in an early renewal through your bank. But if you want to break your mortgage for refinancing, then a renewal gives you chance to look for better offers in the market.
Ideally, you should contact an independent mortgage broker to shop around. An independent mortgage broker is capable of getting quotes from multiple institutions. You must look at all alternatives by consulting an independent broker in all cases to make sure you are making a right decision before you lock in for a fixed period at a certain rate.