07 Sep The Pros and Cons of Automatic Mortgage Renewal
Renewing your mortgage automatically may not be the right choice for everyone, and a lot will depend upon your current financial position, you’re your future financial goals.
Let’s look in a little more detail at the advantages of having a mortgage that renews automatically:
You could save money without new broker and lender fees
You can save time and money if satisfied with your existing lender and the renewal terms they’ve given you, and if you have a private mortgage, you may find that the renewal fee is a lot less than the fees charged to switch your mortgage.
Cut out the mortgage application process
Provided you find the new mortgage interest rates and terms offered to you by your existing lender to be acceptable, then you could cut out the lengthy mortgage application process by sticking to what you have.
You won’t need to requalify for the stress test
An automatic mortgage renewal means you won’t have to requalify for the newly renewed mortgage and can avoid the increased stress test.
Now, let’s look in a little more detail at the disadvantages of having a mortgage that renews automatically:
You could be paying more
It’s best to carefully review your mortgage renewal offer with a professional broker, who can help you avoid getting stuck in a mortgage with a higher rate of interest and additional renewal fees.
You may miss the chance to consolidate your debts
If you – as many Canadian citizens do – have high-interest credit card debt, car financing or student loans, you could save a lot of money by consolidating your high interest debt into a low interest mortgage, something you could miss out on if your mortgage automatically renews.
You could also miss the chance to pay down your mortgage quicker
If, during your original mortgage term, you saved up extra money or gained a lump sum from somewhere, you could make a lump sum payment towards your principal mortgage balance, provided you don’t allow your mortgage to renew automatically.
You might not be able to switch your rate
While a lot will depend upon the current economic climate, there are times when switching from a variable rate to a fixed rate mortgage renewal, and vice versa, might be worthwhile, but if you allow your mortgage to automatically renew, this may not even be an option.
If you’re not sure whether an automatic mortgage renewal is the right choice for you, it can be beneficial to consult with a local mortgage broker, who can give you their impartial advice and help you get the best deal for your money.