Important Mortgage Options and Information for Home Owners

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Applying for and being approved for a mortgage takes research and fiscal responsibility, but at a certain point a renewal of that mortgage will be necessary. When an individual or family first purchases a home, the mortgage agreement has specific terms attached for the length of the term, but when that term ends it might be necessary to reevaluate certain elements of the mortgage to renew it for an additional term.

Close to the end of the term, a letter in the bank will arrive regarding the renewal and the first thoughts in someone’s mind will be that it’s that time for a mortgage renewal so what are your next steps. Saving money and having a hassle-free renewal starts with research and understanding every potential fee and change that might come during the renewal process.

Deciding to Change Lenders

Renewing a mortgage offers home owners the option to carefully discuss what changes might be necessary for the renewal. One of the biggest decisions during any discussion of a mortgage renewal is whether the mortgage will be renewed with the same lender or whether a new financial entity might offer a better deal.

It’s a good idea to start looking around for better deals before the end of a mortgage term arrives because by the time the letter comes in the mail from the bank, it will be too late to do any serious research on the subject. Making some telephone calls to various financial institutions and lenders will offer a home owner some idea as to the current market rates and which lender might offer the best deal at renewal time.

Changing the Payment on a Mortgage

Once a home owner has decided upon the most favorable lender for a mortgage renewal, one primary decision to be made will be whether a change in the amount paid each month (or every two weeks) is necessary. Financial advisors today suggest that paying off a mortgage as quickly as possible will always offer the best benefit for the long term. Looking at what a standard mortgage calculator might say is a good place to start for discussion on payment modification.

If a significant change in monthly payments cannot be made, a home owner might want to consider switching from a yearly to a biweekly payment arrangement, which means that instead of paying the mortgage once a month, a family would be paying the mortgage every two weeks. This would be equal to an entire additional payment every year and would likely offer a reduced payoff timeline.

Fees to Consider with a Different Lender

The biggest obstacle to switching lenders when it comes time to enter into a mortgage renewal are the fees that might be required with a new lender, and sometimes the fees charged by a new lender would be so expensive that any savings made with switching to that new lender would be reduced significantly by the addition of those fees. It’s also important to consider that switching lenders might result in a home owner having to renegotiate or change his mortgage insurance.

Some of the fees included with the transfer of a mortgage to a new lender include:

1. Set-up fees
2. Appraisal fees
3. Administration/paperwork fees
4. Transfer fees

Meeting with a mortgage broker might be a good idea so that someone else can do the math required to figure out whether a present lender offers the best deal or whether a new lender would result in savings over the life of the new mortgage term.

Renewing a mortgage doesn’t have to be a difficult experience and anyone armed with enough information and research will be able to hit the ground running when it comes time to make changes.

Melissa Wood contributes as an editor at  Obsessed with finding small ways to save money every day, she enjoys sharing her frugal lifestyle to the MoneyWise Blog. Read more about Melissa on her Google+ page.