In Canada, the longest allowable loan you can receive is for ten years. Most mortgages will not be paid within this length of time, meaning that homeowners will need to choose between renewing and refinancing at least once over the period that they own their home. We are often asked by our clients whether or not they should renew, so this week’s article we are going to discuss the differences and advantages of each option.
A mortgage renewal is simply the homeowners choice to resign at the previously agreed upon rate. Every term negotiated at the beginning will remain in effect. In these cases there is no negotiation, you simply sign on for another 5 or 10 years.
Refinancing works a little differently. Instead of agreeing to the terms from the last 5 to 10 years, you are opening up your mortgage to renegotiation. The goal is to swap your current mortgage for a brand new one. When it comes to refinancing, you don’t have to wait until the end of the loan period, but most homeowners do in order to avoid extra paperwork or fees.
The decision between renewing and refinancing is a highly personal one. If you are completely happy with your mortgage terms and are enjoying a lower rate than what is currently available on the market, then it is wise not to refinance and simply renew.
Refinancing can be beneficial in situations where you can take advantage of lower rates, especially if you don’t expect to be paying off your mortgage early. Some homeowners want to change their terms so that they can focus on higher interest debts such as credit cards. If your financial situation has changed in any way from when you first signed for your mortgage, it’s worth taking a look at your refinancing options.
Having a maximum length of a 10 year loan period allows both lenders and borrowers a certain amount of flexibility. Consider the end of your term an opportunity to further improve your financial situation and how a change can help you reach your own personal goals. For advice on whether or not to refinance, call the mortgage experts at Source Mortgage today!
Source was absolutely great to work with - went above and beyond to help us get everything done when buying our new home. Highly recommended!! Chad and Jenelle Richards Jan 09 2013
Chad and Jenelle Richards
Added January 23rd 2013
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