You bought your first house some years ago. Your mortgage is coming up for renewal just around the corner. For many people in Toronto, this is a predicament that they will face this year. These homeowners will have to decide how they want to manage this opportunity to either renew or refinance.

Mortgage renewal and mortgage refinancing are likely terms you’ve heard before but may not know precisely which is better.

What Is Mortgage Renewal?

Mortgage renewal is essentially a continuance of your current mortgage.

Renewal happens at the end of a mortgage term. Unless you pay the full balance off, there will still be a balance remaining. At that time, you can opt to renew your mortgage with your original lender without breaking any terms or encountering any fees to discharge/transfer your mortgage to another lender.

When renewing your mortgage, you get a different interest rate, can opt for a different term, and it may have different conditions.

Learn more about buying a house and mortgages with these posts next:

Advantages Of A Mortgage Renewal

  • Lock in a lower interest rate.
  • Switch the type of mortgage you have, if applicable, to better accommodate future plans.
  • Have the option to refinance to make changes to your mortgage with no penalty.

Disadvantages Of A Mortgage Renewal

  • You may be forced to renew at a higher interest rate if rates are not low.
  • You may end up having higher monthly payments if you don’t refinance in some way.

What Is Mortgage Refinancing?

Mortgage refinancing is when you break your current mortgage, and replace it with a new mortgage typically with better terms and rates.

When refinancing, you can change lenders, term length, rate type, and payments, however, it may come with financial penalties attached for breaking your current mortgage.

A lot of people opt to refinance to access some of the equity in their home. There are lots of reasons to refinance, including to take advantage of lower interest rates, and different types of refinancing, such as rate-and-term refinancing, cash-out refinancing, and debt consolidation refinancing.

Advantages Of Mortgage Refinancing

  • Save money on interest.
  • Lower your monthly mortgage payment.
  • Add or remove a co-borrower or co-signer.
  • Receive the option to cash out a part of your equity.
  • You may be able to get rid of private mortgage insurance if your equity has surpassed a certain amount.
  • Change loan terms and features, if applicable, as needed.

Disadvantages Of Mortgage Refinancing

  • You pay penalties and fees in order to refinance your mortgage.
  • If you take out a larger loan or opt for a longer term, there may only be limited savings after fee deductions.

Which Is Best: Renewal Or Refinancing?

Talk to a financial advisor or mortgage broker before you decide definitively on whether to renew your mortgage or refinance.

There are certainly reasons to do both, however, careful calculations must be taken as it pertains to determining which offers the most savings. In a lot of cases, you may be advised to wait until your mortgage renewal date to avoid the fees that can sink the profitability of a refinance – though this isn’t always the case.

You will want to have a thorough examination of your financial situation, including your debt-to-income ratio, credit report and credit score, proof of income, property tax bills, and more.

Mortgages can be costly. If renewing your mortgage does not make sense financially and mortgage refinancing isn’t available in the way you want it, if you opt to go a different direction and sell your home, we can help. Contact the experts at Adrian + Andrea today.

Reach out to us today Call us at (416) 319-6893 or email info@adrianandrea.com today!