The process of renewing a mortgage often requires the borrower to take out a new loan with their existing lender. The renewal process can seem overwhelming, but it doesn’t have to be. The key is understanding the terms and conditions before you start on your journey through this process. With some research and an open mind, you will find that refinancing your mortgage isn’t as scary as it might sound.
Suppose you’re a homeowner, mortgage debtor, or mortgagor in Canada who is considering renewing your current mortgage with the same lender that issued it originally. In that case, this blog post may be of interest to you. It will outline what happens when a borrower decides to renew their existing mortgage with the same lender and discuss some of the pros and cons.
What does it mean to mortgage renewal in Canada? Renewing an existing Canadian home loan means that you are agreeing to continue paying back your outstanding balance at the same time as making new monthly payments for up to 30 years (the typical term length). It can often make sense for borrowers who want stability and predictability.
Renewing your mortgage is an important decision that should not be taken lightly. If you are considering renewing your mortgage, it’s important to consider the pros and cons of doing so
Pros: You can reduce your monthly payments by extending the amortization period, locking in a lower interest rate for up to 10 years, or both.
Cons: When you extend the amortization period on a mortgage, you increase the total amount of time over which your loan will have to be repaid and may end up paying significantly more interest than if you had renewed at a shorter-term length like 5-year fixed rates from 3-4%. Additionally, when rates rise after renewal day, there is no option to refinance in the current market.