Refinancing V.S. Renewing Your Mortgage (What's the big difference??)

If you're a homeowner in Canada, you may have heard about refinancing or renewing your mortgage. While these terms may sound similar, they actually refer to two very different processes. In this blog, we'll explain the differences between refinancing and renewing your mortgage, and help you decide which one is right for you.

What is mortgage refinancing?

Refinancing your mortgage means replacing your current mortgage with a new one. You may choose to refinance your mortgage if you want to:

• Lower your interest rate: If interest rates have dropped since you first took out your mortgage, you may be able to get a lower rate by refinancing.

• Change your mortgage term: If you want to pay off your mortgage faster, you may choose to refinance to a shorter term. Alternatively, if you're struggling to make your mortgage payments, you may be able to refinance to a longer term to reduce your monthly payments.

• Access equity in your home: If your home has increased in value since you bought it, you may be able to refinance to access some of that equity. You can use the money for home renovations, debt consolidation, or any other purpose you choose.

When you refinance your mortgage, you'll need to go through the mortgage approval process again, just like when you first bought your home. This means providing documentation of your income, assets, and debts, and going through a credit check. Depending on your situation, you may need to pay a penalty for breaking your existing mortgage early.

What is mortgage renewal?

Renewing your mortgage means signing a new contract with your current lender for another term. When your current mortgage term is up (usually 5 years), you'll have the option to renew your mortgage with your current lender or switch to a new lender. You may choose to renew your mortgage if you want to:

• Maintain your current interest rate: If you're happy with your current interest rate, you can renew your mortgage to lock in that rate for another term.

• Change your mortgage term: You can also use your mortgage renewal as an opportunity to change your mortgage term. If you want to pay off your mortgage faster, you can renew to a shorter term. If you want to reduce your monthly payments, you can renew to a longer term.

• Switch lenders: If you're not happy with your current lender or if you think you can get a better interest rate elsewhere, you can use your mortgage renewal as an opportunity to switch lenders.

When you renew your mortgage, you won't need to go through the mortgage approval process again. However, you will need to negotiate your interest rate and terms with your lender. It's important to shop around and compare rates from different lenders before you renew your mortgage to make sure you're getting the best deal.

Which one is right for you?

Whether you should refinance or renew your mortgage depends on your individual situation. Refinancing may be a good option if you want to access equity in your home, lower your interest rate, or change your mortgage term. However, it's important to consider the costs involved, such as penalties for breaking your existing mortgage early, and the mortgage approval process.

Renewing your mortgage may be a good option if you're happy with your current lender and interest rate, but want to change your mortgage term or switch lenders. However, it's important to compare rates from different lenders before you renew to make sure you're getting the best deal.

In summary, refinancing and renewing your mortgage are two different processes with different goals. If you're not sure which one is right for you, contact me directly and I can help you make an informed decision based on your individual situation.