Mortgage Blog

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What are my options at renewal?

May 12, 2021 | Posted by: Ask Ana Cruz

Our last video about Refinance and Referral has led to many questions and calls, so today I want to break it down a little further for you.

First if you have not watched the Renewal or Refinance video, go back and watch that. https://youtu.be/rJBh-T36gCI You can find our weekly videos on Youtube & Instagram @askanacruz

 

Today we are focusing on those who have a current mortgage. If you don’t have a current mortgage we're glad you’re taking the time to educate yourself and when you are ready, we are here to help you. 

 Amortization and Term

Mortgages are typically amortized over 25-30 years, This means that you have 25-30 year to pay off your mortgage however, within that timeframe, you can choose a different term every time you are up for renewal. 

 

For example 

If you start off with a 30 year amortization and you take a 5 year term - this means that you have decided to stay with that lender for 5 years and your mortgage payments are calculated using that your term over the 30 years. Once that term is over and if you have made no additional voluntary payments towards your mortgage, you will have 25 years left on your amortization.

 If you continue down this path of taking a 5 year term every time you are up for renewal then you will need six, 5 year terms to pay your mortgage in full.  

That’s 5 years x 6 terms = 30 years. 

Remember, you have the options to use your pre-payment privileges to shorten the amortization voluntarily  - that’s another video called pre-payment privileges - go look for that one too  at https://youtu.be/1NoLJ6DVH_I

 

So now that you understand terms and amortization lets talk about options available. During the time you hold a mortgage you always have three options

  1. Renewal at the end of your term
  2. Refinance at the end of your term 
  3. Refinance at any time - however this option normally comes with a penalty since you would be breaking your contract with your lender and not waiting until the end of your term to make changes.

 

So you’ve completed your current term and now you have the following options and decisions to make:

  1.  What term do you want now? - 1, 2,3,4,5,7,10 years
  2.  What rate type are you looking for?- variable or fixed 
  3.  What payment frequency would you like - remember that you can choose from any payment frequency, it doesn’t have to be the same as you currently have. If you’ve been watching our videos, you know that I will always recommend accelerated bi-weekly or even accelerated weekly as this will help you pay down your mortgage effortlessly and systematically - kind of like a set it and forget it.

 

It’s important to note that the above mention are the only things you are changing at renewal. - Everything else stays the same - meaning: 

  • The mortgage amount stays the same - if you have a $345,000 mortgage on your renewal date, that will be the amount of your new mortgage
  •  The amortization continues it’s course - meaning if you have a 20 year year amortization on your renewal date, then you are starting your new term with a 20 year amortization.

 

If you still have questions about renewal or want to work out what your are, 

Remember to connect with me and I’ll be happy to help 

 

So until next time, I hope you all have a great week 

Ana

 

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