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Figuring out what’s right for you


If you have a mortgage that’s renewing soon and this is the first time you’ve come to the end of a mortgage term, you’ve got some options and probably a few questions. Regardless of how long the mortgage term is (6 months to 10 years), and assuming you don’t plan to pay it off in full, you’ll have two choices: Renew or Refinance. Here’s what you need to know:

You’ll get a letter or an email reminding you of your upcoming renewal and how easy it is to renew with the same mortgage terms you had before. These reminders typically arrive several months ahead of your scheduled renewal date, and give you the option to renew early in case rates are expected to go up.

Option 1: Renewing your mortgage

When you renew your mortgage, you agree to stay with your current lender for another term. The terms and conditions of your mortgage generally stay the same and you’ll be offered the current interest rate, for a specified term. If you are happy with your current mortgage and your research suggests you are getting good value for your money, you may have no reason to change your plans.


Option 2: Refinancing your mortgage

Refinancing can take place at any time during your mortgage term. You can refinance because you want to lower your monthly payments by creating a new mortgage with a lower rate and a new amortization period. Or, you can refinance because you want to borrow some more money and add it to the amount you currently owe on your mortgage. You can refinance your mortgage at any time throughout your term but you may be subject to penalties if you do it before the term expires. Learn more about when it makes sense to refinance.


Do I pay penalties if I refinance?

When you refinance your mortgage or pay it off ahead of schedule, you may have to pay a penalty called the “Interest Rate Differential” (IRD). Some lenders charge additional fees on top of the IRD. A Meridian Mortgage Specialist will be able to tell you if the cost of fees will outweigh the advantage of acting too soon. It’s just one of the ways we help you make more informed decisions.


Renew or refinance? What’s best for you?


Your options Renewing your mortgage Refinancing your mortgage
When can I do it? Renewals only happen at the end of a mortgage term. Terms can be anywhere from six months to 10 years. You can refinance your mortgage at any time but there may be fees if you are not close to your scheduled renewal date.
How does it work? You renew the mortgage you have today with the same terms and possibly a new interest rate. A new mortgage is created and you may have to go through the steps of requalifying if the amount has gone up or your financial situation has changed.
Does it cost money? No. Renewing can happen automatically at no cost to you. Yes. You may have to pay at least some of the legal and administrative costs of creating a new mortgage.
What should I do? Renew when you are happy with your current mortgage and monthly payments. Before you renew, shop around to see if you can get a better deal. Ask about interest rates and options to pay your mortgage off faster.

You can refinance in order to create a new, more affordable mortgage. Be sure you understand the long-term cost of this decision.

Refinance when you want to borrow more money. Common reasons are:

  • Renovations
  • Education
  • Debt consolidation
  • Major purchases such as a boat or recreational vehicle