by Arefa Kachwala, CFA
As your mortgage renewal date approaches, it’s a perfect time to reassess your financial situation and explore options to enhance your financial well-being. Here are key tips to make the most of your mortgage renewal:
Shop Around for Rates and Offers
Don’t settle for the first renewal offer. Compare rates and cash back offers from different lenders. A bit of homework could save you money over the term of your mortgage.
Review Terms and Conditions
Carefully review the renewal terms, including interest rates and amortization periods. Ensure they align with your long-term financial goals to avoid surprises.
Assess Your Financial Situation
Take this opportunity to evaluate your overall financial health. Review all debts, such as credit cards and personal loans, and consider debt consolidation. Combining high interest debts into your mortgage could simplify payments and reduce interest costs.
Consider Penalties for Mid-Term Changes
Life is unpredictable, and you may need to change your mortgage mid-term. Review the penalties for breaking your mortgage early to make informed decisions and avoid financial pitfalls.
Optimize Your Mortgage for Faster Payoff
If your goal is to pay off your mortgage faster, consider:
- Making Lump-Sum Payments: Apply any bonuses or tax refunds as lump-sum payments.
- Increasing Monthly Payments: Adding $100 monthly can save thousands in interest and shorten your mortgage term. For example, on a $400,000, 25-year mortgage at 4.5% interest, this could reduce your mortgage period by around 22 months and reduce total interest paid by $23,500.
- Bi-Weekly Payments: Switching to accelerated bi-weekly payments results in an extra payment each year, reducing your mortgage term.
Evaluate Cash Flow and Savings Goals
Assess how your cash flow aligns with your financial goals. Optimize spending and saving strategies. Consult a qualified financial advisor to identify opportunities to increase your net worth and ensure your mortgage renewal supports your broader strategy.
Know Your Options
Being informed about your options – whether switching lenders, adjusting terms, or exploring different mortgage types – empowers you to make the best financial decisions.
Key Takeaways:
- Shop around for rates and offers.
- Optimize for faster payoff.
- Review your overall financial goals and consult with a financial professional.
