Mortgage rates fluctuate, so doing the math and having some foresight is an essential part of the home-buying process. When mortgage rates rise, homeowners who have a variable-rate mortgage , or those who are renewing their mortgage at a higher interest rate, need to be prepared for higher monthly payments. It might be a few hundred dollars, or it might be a few thousand. This all depends on the size of the mortgage and the interest rate.

Before diving into the steps of renewing the mortgage, it is essential to become acquainted with the basics of mortgage renewals.

Mortgage Renewal: A Primer

So, what do you need to know about a mortgage renewal? The typical mortgage term, which is the length of time you’re committed to a given interest rate and borrowing conditions, can vary from six months to 10 years, but the most common is five years. When the term expires, you’ll need to renew your mortgage to continue borrowing from the lender, until your mortgage is totally paid off. At this time, you can modify the terms of your mortgage, including changing the length of the term, adjust the amortization period or payment frequency, among other things.

What You Need to Know About Re-qualifying

Now, what about re-qualifying for a mortgage?

Borrowers need to re-qualify if they switch mortgage lenders. The process of renewing with the current mortgage lender is easy, as it does not require re-qualifying or re-negotiating better terms and conditions. However, once mortgage holders decide to change lenders, they must re-qualify.

Steps to Mortgage Renewal

Mortgage renewal is a crucial decision that should be carefully considered. You must view current market conditions, evaluate your financial goals, and consult with mortgage professionals to ensure the renewed mortgage aligns with your goals. In addition, the process will involve renegotiating the terms and conditions of an existing mortgage loan, which affirms that a decision must be well-planned.

Here are six steps to follow when renewing a mortgage:

Source: CMHC, https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3410014501

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