Mortgage renewals and extensions offer investors an effective way to keep invested funds earning.
For our borrowers, continuing their mortgage offers more time to complete their primary plan -- this is usually to refinance with an institutional lender but could include plans to sell their property, bring on a co-signer, or obtain funds from another source.
We are hoping that recent improvements to our renewal process will lead to more renewals each month for our investors.
7 Things Investors Should Know about Mortgage Renewals & Extensions:
1. The term "renewal" is a formal agreement to hold the mortgage for a specified period of time (i.e., 6 or 12 months). The term "extension" is an accommodation provided to the borrower to hold the mortgage for a short amount of time, without a formal signed agreement (normally no more than 30 days).
2. Renewals provide more time for the borrower to work on their finances and work towards a future payout. We sometimes offer a shorter-term extension to align with specific plans of a borrower (i.e., refinance in 6 months, sale of property closing on x date, etc.).
3. The majority of clients borrow from Hosper on a short-term basis. Our 12-month term often provides a runway for a longer-term financial plan. Despite this, life is unexpected and plans sometimes take longer. We have a few clients who have renewed their mortgages for the past 4 years. Are these inherently bad borrowers? On the contrary, these have been excellent deals for our investors.
4. All protections in place during your initial term remain in place for the subsequent term. Valid home insurance remains in place on the property, and we are notified if there are continued arrears on a first mortgage or condo fees. These items are monitored throughout the entire loan duration, not just at renewal.
5. Renewals and extensions generally help our borrowers, which generally helps the reputation of Hosper as a solution-oriented lender. Agreeing to renewals (when suitable) will encourage brokers to send Hosper new opportunities in the future.
6. A renewal offer will be sent to you once we have obtained a new appraisal and repriced the investment based on the current market value. If you approve the terms, the offer will be relayed to the borrower. Upon confirmation of interest to renew, a renewal agreement will be sent to the borrower and an updated servicing agreement will be provided for your signing. Mortgages, where the investor chooses not to renew on maturity, may result in enforcement of the mortgage to return investor principal.
Please note: if you do not respond to the renewal offer within 5 business days, Hosper will make the most prudent decision as if it were our own mortgage.
Don't wish to renew? See if your DMI is eligible for our MIC Rollover Program!