Make an informed choice with our guide on Mortgage Renewal vs Refinance. Learn how each option affects your financial situation and goals.
Think of your mortgage like a road trip. When your term ends, you can either renew your current route or refinance and take a new path. Both options lead you to your destination, but each offers a different experience.
Mortage Renewal is like staying on the same road, just adjusting your speed. You stick with your current lender, but your interest rate will change. It’s simple and quick, with no need to start over. About 60% of homeowners choose to renew because it’s easy and familiar.
Refinance is like choosing a new route altogether. You get a fresh start, either with your current lender or a new one. You can adjust your loan amount, interest rate, or term length.
Plus, refinancing could allow you to tap into your home’s equity, giving you extra cash for things like home improvements or paying off debt. Around 30% of homeowners refinance each year, but it involves more paperwork and planning.
Both paths lead you forward, but how you get there depends on your needs and goals. Whether you want to keep things simple or explore new opportunities, we’ll help you decide which route works best for you. Let’s dive in!
Mortgage Renewal
When your mortgage term ends, you can renew your mortgage with your current lender. This means continuing with the same lender, but at a new interest rate.
What Happens During Mortgage Renewal?
Same Lender, New Terms: You stick with your lender, but the interest rate and other terms (like the mortgage length) may change.
Quick and Easy: The process is simple and requires less paperwork than refinancing.
No Need to Switch Lenders: You don’t have to find a new lender or reapply for a mortgage.
Review Your Terms: Even though it’s simple, check if your current deal still works for you.
Why Choose Mortgage Renewal?
Fast Process: Renewing is quick and hassle-free.
Stable Payments: Your payments are set for the next term, helping with budgeting.
Better Rates (Possible): If interest rates have dropped, you could get a lower rate and reduce monthly payments.
Less Change: There are fewer adjustments compared to refinancing.
Compare Options: It’s a good time to see if a better rate is available, even with your current lender.
Around 60% of homeowners renew their mortgage because it’s the easiest option. However, always compare rates to make sure you’re getting the best deal.
Refinance
Refinancing allows you to replace your current mortgage with a new one, often with a different lender or new terms, to get a better interest rate or access equity.
What Happens During Refinancing?
New Lender or Terms: You can switch to a different lender or adjust your mortgage terms, like the length or interest rate.
More Paperwork: The process requires more paperwork than renewing and could involve reapplying.
Access to Equity: Refinancing can allow you to borrow extra money if your home has increased in value.
Credit Check: Lenders will usually check your credit, so your financial situation will be considered.
Why Choose Refinancing?
Lower Interest Rate: You could secure a better rate and reduce monthly payments.
Access to Cash: Refinancing can provide you with extra funds for home improvements or other needs.
Change Loan Terms: You can change the length of your loan or switch from an adjustable-rate to a fixed-rate mortgage.
Pay Off Debt: You can use refinancing to pay off high-interest debts with the extra funds.
Longer Process: Refinancing may take longer and involves more paperwork compared to mortgage renewal.
Refinancing is a good option for homeowners seeking better rates, changing loan terms, or accessing home equity. Always compare offers to find the best deal.
Mortgage Renewal vs Refinance (Tabular Form)
Compare the key differences between renewing and refinancing your mortgage to find the best option for your needs.
| Feature | Mortgage Renewal | Mortgage Refinance |
|---|---|---|
| Definition | Extending your existing mortgage with the same or new terms. | Replacing your current mortgage with a new one, often with different terms. |
| Purpose | To continue your mortgage after the current term ends. | To access home equity, change interest rates, or adjust loan terms. |
| Interest Rate | Can negotiate a new rate with the same lender. | May qualify for a lower rate by switching lenders or terms. |
| Loan Amount | Remains the same as the outstanding balance. | Can increase if you want to borrow more against your home equity. |
| Credit Check | Often not required if staying with the same lender. | Required, as it’s a new loan agreement. |
| Fees Involved | Minimal or none if renewing with the same lender. | Possible legal, appraisal, and lender fees. |
| Approval Process | Generally straightforward, especially with the same lender. | Requires full approval, including income verification and credit check. |
| Flexibility | Limited to negotiating rates and terms. | Offers flexibility to adjust loan structure and access equity. |
| Common Reasons | Maintain current mortgage and avoid penalties. | Debt consolidation, home renovations, or lower interest rates. |
| Impact on Monthly Payments | Typically stays the same or slightly changes based on rates. | Can increase or decrease based on new loan terms and amount. |
| Equity Access | No access to additional funds. | Allows access to home equity for various financial goals. |
| Timing | Done at the end of your mortgage term. | Can be done anytime during the mortgage term (penalties may apply). |
| Penalties | No penalties if done at term end. | May incur prepayment penalties if refinancing mid-term. |
| Suitability | Ideal for those happy with their current mortgage and lender. | Ideal for those needing better terms or access to funds. |
Mortgage Renewal vs Refinance
Understanding Your home mortgage refinance options Deciding between mortgage renewal and home mortgage refinance? We’ll break down the key points to help you make the best choice.
Process
Mortgage Renewal
Simple and quick process with minimal paperwork.
No need to reapply for a mortgage; you just sign a new agreement with your current lender.
Typically takes a few weeks to complete.
Refinance
Involves more paperwork, including credit checks and home appraisal.
Takes longer (several weeks) to complete due to additional steps.
Interest Rate
Mortgage Renewal
Your lender will offer a new rate based on current market conditions, but you have limited room to negotiate.
The new rate is set for the next mortgage term.
Refinance
You can shop around for a better rate with different lenders.
If interest rates have dropped or if your credit improves, you may secure a lower rate and reduce monthly payments.
Lender
Mortgage Renewal
You stay with your current lender.
No need to find a new lender or reapply for a mortgage.
Refinance
You can choose to stay with your current lender or switch to a new lender.
Switching could potentially get you a better deal or more favorable terms.
Loan Terms
Mortgage Renewal
You mainly adjust the interest rate and possibly the term length (e.g., 5 years instead of 3 years).
No major changes to the loan structure.
Refinance
You can change the loan type (e.g., fixed to variable), term length, or even borrow extra money if you have enough home equity.
Offers more flexibility to adjust the mortgage to your needs.
Costs
Mortgage Renewal
Usually no additional costs, unless you change terms (e.g., switching to a longer or shorter term).
No early repayment penalties if you’re just renewing.
Refinance
May involve appraisal fees, legal costs, and other fees.
If you break your mortgage early, you may face penalties from your current lender.
Access to Cash
Mortgage Renewal
You can’t access extra money. The renewal only changes the interest rate and terms of your current mortgage.
Refinance
If you have equity in your home, refinancing allows you to borrow extra money. This can be used for home renovations, debt consolidation, or other needs.
Timeframe
Mortgage Renewal
Faster and easier to complete. Usually, the process is done before your current mortgage term ends.
Refinance
Takes longer due to paperwork, appraisals, and lender comparisons. It can take several weeks.
Flexibility
Mortgage Renewal
Limited flexibility; mainly just adjusting the rate and term length.
Refinance
Offers more flexibility to change the mortgage structure, access extra cash, or improve your financial situation.
Factors to Consider When Deciding Between Renewal and Refinancing
Choosing between mortgage renewal and refinancing? Consider key factors like the best refinance mortgage rates, your financial goals, and long-term plans to make the right decision.
Interest Rates
Renewal: If interest rates have stayed the same or increased, renewing with your current lender could be a simple option.
Refinance: If rates have dropped, refinancing might help you secure a lower rate and reduce your monthly payments.
Financial Goals
Renewal: Choose this if you just want to adjust the rate or term and keep things simple.
Refinance: If you want to change your mortgage terms, lower your rate, or access extra funds, refinancing offers more flexibility.
Financial Situation
Renewal: If your financial situation is stable, renewing with your current lender is often the easiest option.
Refinance: If your credit score or income has improved, you might qualify for a better rate by refinancing.
Home Equity
Renewal: You can’t access extra funds through renewal.
Refinance: If you’ve built up equity in your home, refinancing can let you borrow against that equity for things like home improvements or paying off debt.
Costs
Renewal: Usually has no extra costs, unless you change major terms.
Refinance: Can involve fees such as appraisals, legal costs, or penalties for paying off your mortgage early.
Term Flexibility
Renewal: You can only adjust your interest rate and mortgage term length.
Refinance: Offers more options, including changing your loan type or length and potentially borrowing extra funds.
Time Left on Mortgage
Renewal: A good option if your mortgage term is ending soon.
Refinance: May be possible if you still have time left on your term, but it could come with penalties for breaking the mortgage early.
Switching Lenders
Renewal: You stick with your current lender.
Refinance: You can shop around for a better deal and switch to a different lender.
Plans for the Future
Renewal: Best if you’re staying in your home for the foreseeable future and don’t need extra funds.
Refinance: Ideal if you plan to stay long-term and want to change your mortgage to fit your needs.
Comfort with the Process
Renewal: A quicker, simpler process.
Refinance: Involves more paperwork and steps, but offers more flexibility.
How AJP Mortgage Can Help?
Choosing between mortgage renewal and refinancing can be a difficult decision, but AJP Mortgage is here to make it easier for you. Here’s how we can assist:
Compare Your Options
We’ll help you look at your mortgage, interest rates, and goals to see if renewing or refinancing is the best choice. We’ll explain everything clearly so you can decide if lowering payments, tapping into home equity, or switching your rate is right for you.
Simplify the Process
Refinancing involves paperwork, but we make it easy. We’ll guide you through the steps, explain what’s needed, and work with lenders to keep things moving quickly. You can focus on your goals while we handle the details.
Find the Best Rates
We’ll help you find the best rates, whether you stick with your current lender or shop around. With access to different lenders, we’ll make sure you get the best deal that fits your budget.
Access Your Home Equity
Want to use your home’s equity for renovations or paying off debt? Refinancing can help. We’ll explain how much equity you can use and your options for borrowing. We’ll help you unlock your home’s value in a way that works for you.
Get Personalized Advice
Every situation is different, so we’ll give you advice based on your needs. We’ll consider your income, credit, and goals to recommend the best refinancing options for you.
Real World Case Studies
Explore real-life examples of how mortgage renewal and refinancing can impact your financial journey. Learn from others’ experiences to make an informed decision for your own situation.
Case Study 1: Mortgage Renewal for Simplicity
Discover how a straightforward mortgage renewal helped a homeowner simplify their financial situation and achieve their goals with ease.
Scenario
Sarah and John are nearing the end of their mortgage term and have been happy with their lender for the past 5 years. They have stable finances and are looking for a simple process with minimal changes.
Solution
They chose to renew their mortgage with their current lender. Their lender offered a slightly better interest rate than their previous one, and the renewal process was quick and easy.
Outcome
Simplicity: No need for reapplying or providing additional documents.
Lower Rate: They secured a better rate without much effort.
Stable Payments: Their monthly payments stayed consistent, helping with budgeting.
Case Study 2: Refinancing to Access Home Equity
Learn how refinancing helped a homeowner tap into their home equity to fund major expenses and improve their financial flexibility.
Scenario
Lisa and Mark have built up significant equity in their home over 10 years. They want to refinance to fund home renovations and consolidate some high-interest debt.
Solution
They refinanced their mortgage, using the cash-out option to access their home’s equity. The extra funds allowed them to pay for renovations and reduce high-interest credit card debt.
Outcome
Access to Cash: They used their home’s equity for renovations and debt consolidation.
Lower Interest Debt: Consolidating their credit card debt into a lower-interest mortgage helped save money.
Increased Loan Amount: Their mortgage payments increased slightly, but the benefits outweighed the costs.
Case Study 3: Refinancing for Lower Interest Rates
See how refinancing at a lower interest rate helped a homeowner reduce monthly payments and save money in the long run.
Scenario
David and Emily purchased a home 3 years ago with a higher interest rate. Since then, interest rates have dropped, and their credit score has improved. They want to lower their payments by refinancing.
Solution
They refinanced with a new lender to take advantage of lower interest rates, reducing their monthly mortgage payments.
Outcome
Lower Payments: They saved hundreds of dollars a month with the new rate.
Long-Term Savings: The lower interest rate will save them money over time.
Refinancing Costs: While there were refinancing fees, the savings made it worthwhile.
Mortgage Renewal vs Refinance in Canada
Not sure whether to renew or refinance your mortgage in Canada? We’ll help you understand the key differences so you can make the right choice for your financial needs.
Mortgage Renewal
What it is: When your mortgage term ends, you stay with the same lender and renew your mortgage.
Process: Quick and easy, with minimal paperwork.
Cost: Low or no fees unless you change lenders.
Mortgage Refinance
What it is: You get a new mortgage, either with the same lender or a new one, and change the loan terms, rate, or amount.
Process: Requires more paperwork and approval.
Cost: Can involve appraisal fees, legal fees, and penalties for breaking your current mortgage.
Mortgage Renewal vs Refinance Cost
Wondering about the cost differences between renewing and refinancing your mortgage? We’ll break down the costs so you can make the most cost-effective choice for your situation.
Mortgage Renewal Costs
Low Costs: Renewing with your current lender typically has few or no fees.
Switching Lenders: If you change lenders, you may face legal and administrative fees.
Mortgage Refinance Costs
Higher Costs: There may be appraisal, legal fees, and possible penalties if you break your current mortgage early.
Switching Lenders: Costs for legal and appraisal fees may apply if you refinance with a new lender.
Mortgage Renewal vs Refinance Pros and Cons
Not sure which option is right for you? We’ll break down the pros and cons of mortgage renewal and refinancing to help you make the best decision for your financial future.
Mortgage Renewal Pros
Fast and Easy: Quick process with minimal paperwork.
Low Fees: Little or no cost if you stay with the same lender.
Mortgage Renewal Cons
Limited Flexibility: Fewer options for changing terms or rates.
Potentially Higher Rate: Your new rate might be higher than current market rates.
Mortgage Refinance Pros
Better Terms: You can get a lower interest rate or adjust your loan.
Access to Equity: You can borrow more money if needed.
Lower Payments: Possible to reduce monthly payments.
Mortgage Refinance Cons
Higher Costs: Appraisal, legal, and penalty fees may apply.
More Paperwork: Refinancing takes more time and effort.
Early Penalties: You might pay penalties for breaking your existing mortgage early.
Choosing between renewal and refinance depends on your needs, costs, and goals.
Final Verdict
Choosing between mortgage renewal and refinancing depends on your financial situation and goals. If you’re happy with your current lender and just want a simple process with minimal fees, mortgage renewal is the easier option.
However, if you’re looking for better rates, want to access home equity, or need more flexibility, refinancing could be the better choice, though it comes with more paperwork and higher costs.
Key Takeaways
Renewal is quick, easy, and low-cost, but offers limited options for changes.
Refinance provides more flexibility, including lower rates or accessing home equity, but involves higher costs and paperwork.
Consider your goals: Do you want a simple renewal, or are you aiming for better terms or extra cash?
Not sure which option is best for you? Contact AJP Mortgage today to get personalized advice and guidance on whether mortgage renewal or refinancing is the right choice for your financial goals. Let’s make your mortgage work for you!
Frequently Asked Questions
What is the difference between a renewal and a refinance?
Renewal: You stay with the same lender and get new terms (like a new interest rate) when your mortgage term ends.
Refinance: You get a new mortgage, possibly with a different lender, and change the loan amount, interest rate, or terms.
Is a mortgage renewal the same as a remortgage?
No: Renewal means you stay with your current lender. Remortgage means you switch to a new lender or change your mortgage for a better deal.
Is renewing a loan the same as refinancing?
No: Renewing is staying with the same lender and updating your terms. Refinancing is taking out a new loan, possibly with a new lender, to change terms or get equity.
What is the difference between refinancing and remortgaging?
Refinancing: You can stay with your current lender or switch to a new one to change terms or access equity.
Remortgaging: This is a type of refinancing where you switch lenders for a better deal or to get equity.
