What Takes Place If You Miss the Deadline for Mortgage Renewal?
Mortgage renewal is one of these financial tasks that everyone tends to neglect, until it's too late. The majority of homeowners overlook it because they think it's just a given. But being late on your mortgage renewal might bring you consequences that impact your money management and flexibility.
Don’t wait if your mortgage term is expiring. Allowing the deadline to pass without taking action could mean a higher interest rate, and free choices and the loss of an opportunity to better fit the mortgage to your current situation.
Understanding Mortgage Renewal
In Canada, however, the great majority of mortgages are not interest-only, and at most banks require 25% down on even a second home purchase, even though some can only afford 20%. Instead, they are established in terms, typically from 1 to 5 years. You will need to renew your mortgage if there is a balance due at the end of each term.
Mortgage renewal is your opportunity to:
- Renegotiate the interest rate
- Adjust your mortgage type (fixed or variable)
- Change the term length
- Switch lenders if you find a better offer
But if you miss the renewal deadline, you may lose this opportunity and face less favourable terms.
What Happens If You Miss the Deadline?
Automatic Renewal at the Lender’s Terms: Most lenders will automatically renew your mortgage if you don’t respond by the deadline. However, this is usually at their posted rate, not the best available rate. You might miss out on lower mortgage rates London Ontario borrowers could otherwise access.
Loss of Negotiation Power: When you don’t act before the deadline, you lose the chance to negotiate for better terms. Lenders often use renewal as a way to increase your rate, knowing many borrowers won’t shop around.
Missed Opportunity to Switch Lenders: You can switch to a new lender at renewal with no penalties. But that option disappears if the mortgage auto-renews, locking you into another term with the same lender.
Potential legal issues (in rare cases): If your lender requires action to renew and you miss it entirely, and don’t qualify for renewal, you might face legal issues like foreclosure. This is rare and typically only happens if your financial situation drastically changes.
How to Avoid Missing Your Renewal Deadline?
Know Your Mortgage Term End Date: Mark it on your calendar. Lenders in Canada are legally required to send a renewal notice at least 21 days before your term ends, but being proactive gives you more time to evaluate options.
Start the Renewal Process Early: You can usually begin renewing 120 days before your mortgage matures. It's the best time to buy houses and talk to a mortgage expert.
Work With a Mortgage Broker: A licensed professional, like a mortgage brokers London Ontario Canada can help you find better rates, navigate renewal paperwork, and even switch lenders for better terms- all with minimal hassle.
Why Mortgage Renewal Shouldn’t Be Rushed?
For convenience, a lot of people allow their mortgage to automatically renew. However, the cost of not shopping around can add significantly. For example, a difference of just 0.5% in your interest rate could cost you thousands of dollars over a 5-year term.
Additionally, the mortgage market changes constantly. Mortgage rates London, Ontario, may have dropped since your last renewal, allowing you to lower your payments. If you don’t act in time, you may miss these market advantages.
Benefits of Working With Mortgage Brokers London Ontario Canada
Working with mortgage brokers gives the following benefits:
Access to Multiple Lenders: Brokers are not limited to one bank. They can present you with a wide range of offers tailored to your financial goals.
Rate Comparison: Brokers can find you the most competitive mortgage rates London, Ontario has available, not just the posted rate your current lender is offering.
Expert Advice: Whether you want to refinance, increase your mortgage amount, or just get a better rate, brokers help you understand the pros and cons of each move.
Seamless Process: Brokers handle the paperwork and negotiation so you can avoid the stress of last-minute decisions.
What If Your Financial Situation Has Changed?
If your income has decreased, your credit score has dropped, or you’ve taken on more debt, renewal can be tricky. In such cases, it’s even more important to act early and speak with a mortgage broker. They can help you:
- Present your application in the best light
- Explore alternative lenders
- Renegotiate terms that fit your current budget
Missing the renewal deadline in this scenario could result in much higher payments or the denial of renewal altogether.
Final Thoughts
As a result, not meeting the deadline to renew your mortgage can restrict your financial flexibility, increase the amount of interest you end up paying and force you into less attractive terms. In some instances, it can even result in severe circumstances such as foreclosure.
To stay ahead of that, get a jump on the renewal. Shop around for better rates. And more importantly, you need to work with experts such as mortgage brokers London Ontario Canada, who have access to some of the lowest mortgage rates London Ontario has to offer.
