Harpreet’s perspective
Real questions. Real properties. Real numbers.
Your mortgage term is ending. Your lender sends you a renewal offer. Then somebody says: ‘Why don't you refinance?’ And now you're wondering whether these are two different words for the same thing. They're not.
What Is a Mortgage Renewal?
At the end of your mortgage term, if there's still a balance outstanding, you generally need another mortgage term. You may renew with your existing lender or potentially explore switching to another lender, subject to qualification and applicable requirements.
If you're simply continuing with the remaining mortgage balance without accessing additional equity or materially changing the borrowing structure, that's a very different conversation from refinancing.
What Is a Refinance?
A refinance generally involves replacing or restructuring the existing mortgage, often because you're changing the mortgage amount or accessing equity. Maybe you're consolidating debt, renovating, accessing equity for another investment, changing the mortgage structure, or accomplishing another financial goal.
A refinance can involve new qualification and costs and may trigger a mortgage penalty if you're breaking an existing term early.
So Which One Should You Do?
My first question is: ‘What are we trying to accomplish?’ If everything is working well and you simply need another mortgage term, renewal or a switch may be worth comparing. If your life has changed and you need to restructure the mortgage or access equity, then refinancing may deserve consideration.
Use Renewal as a Financial Checkpoint
Renewal time is also a great financial checkpoint. What changed during the last term? Income? Debts? Property value? Family? Investment plans? Do you want to pay the mortgage faster? Do you need flexibility?
Maybe your current lender has already given you an excellent renewal. If so, I'll happily tell you. I don't need to move your mortgage simply so I can say I arranged another one. Sometimes the best mortgage advice is: ‘Sign it. You're already in a good place.’ Other times, renewal is exactly when we discover that your mortgage needs a completely different job for the next few years.
Don't ask only: ‘What's my renewal rate?’ Ask: ‘What should my mortgage accomplish during the next term?’