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Tips on Renewing a Mortgage

While mortgage terms are often 20 years or more, many mortgages require renewal every several years. Most people simply renew with their current lender and move on, but with a little research, a homebuyer could save money by renewing their mortgage with another lender. There are several choices to be made, but some mortgage renewal tips can make the process easier.


There are three types of mortgages; closed, open and convertible. Knowing which one is best can make the process of renewal easier. A closed mortgage has fixed payments and the interest rate is usually lower--better for a long term owner. Open mortgages can be repaid at any time but interest rates tend to be higher--better for short term ownership. A convertible mortgage begins as an open mortgage but allows buyers to convert to a closed mortgage at any time with no penalty, which is good for fluctuating interest rates.

Interest Rate

Interest rates are either fixed or variable. Fixed rates do not change with market trends; the interest rate remains the same through the life of the mortgage. Variable interest rates follow the current interest rates, so more of a monthly payment is applied to the principal when rates are low and less is applied when rates are high. Variable rates are advantageous if interest rates are high and expected to decline, while fixed rates are advantageous if interest rates are low and expected to rise.

Shop Around

Instead of renewing automatically, check interest rates at other lenders. There may be fees or special offers that expire, so you should always read the fine print. A familiar bank sometimes will offer lower interest rates that what are advertised.

Lower is Not Always Better

If the difference in interest rates is less than one percentage point, consider other factors as well.

Saving less than one percentage point in interest can sometimes save less than £65 a year. But since renewing a mortgage with another lender can lead to paperwork and hassle, staying with the current lender could be worth the extra money.

Check the Insurance Rates

Many lenders offer additional insurance such as life or income disruption insurance. Before taking out these types of insurance policies, check for lower rates with insurance companies.

Hire a Broker

A professional has a better understanding of mortgages, interest rates and the process of renewing a mortgage than the average homeowner does. Hiring someone to provide assistance can save money. Make sure the professional is a licensed broker and that they have no fees that will not be paid by the lending company.

Keep the Same Payment Amount

When a mortgage comes up for renewal, the monthly payment is often lower. But continuing the payment at the same level can take years off of the repayment term of the loan. The lower interest rate that results from a renewal can save money, as well.