A mortgage may last for a very long time. Some last for as log as 25 years. However, it is not necessary for you to wait all that time for mortgage renewal. Most of the modern day mortgages do not keep you locked in and more often than not it is beneficial to look around for different plans. There can be a lot of benefits for you if you switch from your original plan to something which is a lot more flexible and has better rates of interest. Here is a very good example to make you understand how this works.
Suppose you took a mortgage of $200,000 for your house This mortgage was taken on a four year term, and will be paid back over the amortization period of 30 years on a 7% interest rate. Based upon this plan your monthly payment will be around $1,370. Because the term of the mortgage is only 4 years, that is why it is possible for the lender to demand for the entire payment once the term has ended. In such cases you are left with the choice of either renewing your contract or finding a new lender.
Renewing with your original lender
As long as you have been punctual with the payments you had to make, you will not face any problems while mortgage renewal. The renewing papers are given to you, you fill them, sign them, and then return them. The new mortgage will be dependent upon the amount you owe at the time of renewal. So in case of the example which we were discussing, if the amount left was $190,000 then that will also be the amount for the new mortgage, When you are renewing your mortgage with the same lender you should see a lot of factors. What is the interest rate being charged? Is it expected to go up or down in the coming days? Most importantly, whether you are happy with the lender or not?
Another very popular strategy employed by a lot of people is fluctuating between long term and short term mortgages. For instance, people prefer taking mortgages with longer terms when the interest rates are quite low. They go for the short term mortgages when interest rates are high. So this way, when the time of renewal comes, the interest rates might have fallen. However, this may not work out very well in every circumstance, and it is best to have the seal of approval of a professional before you go for such a plan.
Always review your options
If the lender sends you the mortgage renewal papers, it is not compulsory for you to sign those papers. You should assess the situation carefully. Look at your income and the changes that have affected the interest rates. You might want to go for a mortgage with higher payments so you can clear your debts quickly. You can always take help of financial advisors who will help you in assessing the situation and tell you what to do.
Suppose you took a mortgage of $200,000 for your house This mortgage was taken on a four year term, and will be paid back over the amortization period of 30 years on a 7% interest rate. Based upon this plan your monthly payment will be around $1,370. Because the term of the mortgage is only 4 years, that is why it is possible for the lender to demand for the entire payment once the term has ended. In such cases you are left with the choice of either renewing your contract or finding a new lender.
Renewing with your original lender
As long as you have been punctual with the payments you had to make, you will not face any problems while mortgage renewal. The renewing papers are given to you, you fill them, sign them, and then return them. The new mortgage will be dependent upon the amount you owe at the time of renewal. So in case of the example which we were discussing, if the amount left was $190,000 then that will also be the amount for the new mortgage, When you are renewing your mortgage with the same lender you should see a lot of factors. What is the interest rate being charged? Is it expected to go up or down in the coming days? Most importantly, whether you are happy with the lender or not?
Another very popular strategy employed by a lot of people is fluctuating between long term and short term mortgages. For instance, people prefer taking mortgages with longer terms when the interest rates are quite low. They go for the short term mortgages when interest rates are high. So this way, when the time of renewal comes, the interest rates might have fallen. However, this may not work out very well in every circumstance, and it is best to have the seal of approval of a professional before you go for such a plan.
Always review your options
If the lender sends you the mortgage renewal papers, it is not compulsory for you to sign those papers. You should assess the situation carefully. Look at your income and the changes that have affected the interest rates. You might want to go for a mortgage with higher payments so you can clear your debts quickly. You can always take help of financial advisors who will help you in assessing the situation and tell you what to do.
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