Private Mortgage Renewal: What Happens When Your Term Ends
Private mortgages are short — usually 12 months — so maturity arrives fast. At that date the whole balance is due. You can repay it, refinance it elsewhere, or renew with the same lender for another term, usually for a fee. Start planning at least three months ahead: a maturity that arrives without a plan is one of the most expensive situations in private lending.
Key takeaways
- At maturity, the full balance of a private mortgage is due; renewal is the lender's choice, not a right.
- Renewal usually costs a fee — commonly around 1% of the balance — and the rate may change.
- Switching to a new private lender means a new lender fee, legal and appraisal, so it often costs more in the first year than renewing.
- The best renewal is the last one: use the term to qualify for a bank or B-lender refinance.
What is a private mortgage?
A private mortgage is a loan on your home from a non-bank lender — a mortgage investment corporation, a private lending company or an individual investor. It's approved mainly on your equity, usually interest-only, for a short term. Because the term is short, renewal is part of almost every private borrower's plan. Start with our private mortgage guide if you're new to them.
What is a second mortgage?
A second mortgage is registered behind your first. Private seconds renew the same way private firsts do — but with an extra wrinkle: if your first mortgage also renews around the same time, you can often refinance both into a single new mortgage and pay no renewal fee at all. Check both maturity dates now.
Why are private mortgage positions important at renewal?
Each lender decides on renewal independently. A first-position lender is better protected and more likely to renew at a similar rate. A second-position lender looks at whether your first mortgage is current, whether property values have held and whether your combined loan-to-value still fits its limit. If the first mortgage has changed — a new lender, a higher balance, or arrears — the second lender may decline to renew.
Who decides whether a private mortgage renews?
The lender — an individual investor, a private company or a MIC's credit committee — usually through the mortgage administrator or brokerage that services the loan. MICs tend to have published renewal policies; individual lenders may simply want their money back. Ask for the lender's renewal terms in writing 60 to 90 days before maturity. If they won't renew, that's the time to start a refinance, not the week before.
How does the payment work after renewal?
Usually it stays interest-only, recalculated at the renewal rate. The renewal fee is typically added to the balance or paid at renewal. Compare renewing a $200,000 private first mortgage with switching to a new private lender:
| Renew with current lender | Switch to a new private lender | |
|---|---|---|
| Rate (illustrative) | 9.99% | 9.49% |
| Monthly interest-only payment | $1,631.37 | $1,551.27 |
| Fees | 1% renewal fee ($2,000) + about $500 administration | 2% lender fee ($4,000) + 1% broker fee ($2,000) + legal and appraisal (about $2,100) |
| Effective first-year cost | about 11.2% | about 13.9% |
The lower rate doesn't pay for the switching costs within a one-year term. Switching makes sense when your current lender won't renew, demands a large fee or rate increase, or when the new lender offers a longer or open term that gets you to a bank sooner. Your current lender may also charge a discharge fee when you leave.
What's the term of a private mortgage renewal?
Commonly another 6 or 12 months. Some lenders offer a short extension — for example 3 months — when a sale or bank refinance is already underway. A short, open extension is often cheaper than a full renewal if you're close to the finish line.
What are the criteria to get a private mortgage renewed?
- On-time payments during the term.
- Property taxes and insurance current; lenders check both.
- Loan-to-value still within limits; some lenders order a new appraisal or valuation.
- Your first mortgage in good standing, if the private loan is a second.
- Progress on your exit plan — lenders renew more readily when they can see a refinance or sale coming.
Why are private renewal rates higher than traditional mortgage renewals?
A bank renewal is priced against the bank's low-cost funding, and the bank wants to keep you for years. A private lender's money is investor capital expecting a higher return, the loan is uninsured, and the borrower still doesn't fit bank rules. The renewal fee compensates the lender for re-underwriting and for leaving its money in for another term rather than redeploying it.
What are the pros and cons of renewing a private mortgage?
| Pros | Cons |
|---|---|
| Usually cheaper than switching lenders for one more term | Renewal fees compound the cost of staying private |
| No new appraisal or legal work in many cases | The lender can change the rate or decline to renew |
| Buys time to finish a refinance or sale | Interest-only — the balance still isn't falling |
| Short extensions are available for a deal already in progress | Each renewal makes the eventual exit more urgent |
Sources
This article is general information, not financial or legal advice. Renewal terms are set by each lender. Examples are illustrative and rounded. Mortgage financing is subject to lender approval.
Frequently asked questions
The full balance is due at maturity. You need to refinance with another lender or sell. If neither happens, the lender can start enforcement. Begin looking for a replacement lender at least 60 to 90 days out.
Sometimes. A record of on-time payments, lower loan-to-value and a near-term exit plan give you leverage. A competing written offer helps.
Refinance to a bank or B lender as soon as you qualify — it's almost always cheaper. Renew only to bridge the time until you do.
No. The federal rule that lets uninsured borrowers switch lenders at renewal without the stress test applies to straight switches between federally regulated lenders, not to private mortgages.
Private mortgage maturing soon?
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