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Mortgage Renewal

Many first-time homebuyers in Canadian cities and townships use a mortgage to finance their purchase. Almost a majority percentage of these mortgages come with amortization of between 20 and 30 years. But the Canadian Law restricts you to taking loans with a maximum term of 10 years. So in case, your mortgage term expires before you complete your mortgage repayments, it is considered a wise move need to renew that mortgage for at least one more term.

The mortgage renewal system essentially protects both the consumer and the lender. It prevents lenders from agreeing to a fixed interest rate for a couple of decades.

Consumers, on the other hand, get an opportunity to change the terms of their loan if they are not happy with and cannot tolerate for the entire amortization period. If you’re reexamining your monthly mortgage payment to assess whether it is suitable for your financial situation and lifestyle, Mortgage Renewal provides you with a golden opportunity. For instance, you may be earning significantly more than when you first took your mortgage, and are considering making higher payments to pay down the principal sooner. While renewing your mortgage it is important to consider the following:

  • Prepayment options – There is no need to pay any interest if you can pay the principal amount early enough. This will have a major impact on the life of the loan
  • The terms and conditions offered by your bank or other banks with regard to the interest rate and closing costs.
  • Short- and long-term goals – Instances where your child is joining college, or you’re getting a promotion at work or starting your own business, highly impacts your ability to repay your loan, and should be considered in your renewal. Conversely, you may be thinking about paying for your children’s education and need to reduce your payments to a manageable level. The rules and steps for reviewing your mortgage renewal agreement in Ontario are consistent with other provinces across the country. You have a narrow window, between 180 and 120 days to the expiry of your existing loan’s term, to consider whether you want to renew your mortgage loan with your current bank. If you start the renewal process earlier, you may incur prepayment charges because you will be terminating your original mortgage plan early.
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