Mortgage Renewals

When you take out a mortgage, you’ll be committed to it for the duration of your term. And once your loan term’s expiry date approaches, you’ll need to renew your mortgage if you are not yet ready to pay your outstanding loan balance off in full. 

But what exactly is involved in a mortgage renewal? Can you renegotiate new terms and rates? And are you able to move over to another lender?

Let’s dig deeper into mortgage renewals to help you prepare for when your term nears its end.

What Is A Mortgage Renewal?

When you take out a mortgage, you are committed to the conditions of the loan, including the term, for a set amount of time. You can choose from a variety of term lengths, from as little as 6 months to 10 years, though the average term length for mortgages in Canada is 5 years.

Once your mortgage term is set to expire, you’ll need to either pay the entire loan balance in full or renew your mortgage. Considering the large loan amounts associated with mortgages, most borrowers will continue to renew their mortgage every 5 years until the full amount is paid off.

Mortgage Renewal Statement

All federally-regulated financial institutions are required to provide borrowers with a mortgage renewal statement a minimum of 21 days before the existing term expires

A mortgage renewal statement contains important information about your mortgage when you renew, including the following:

  • Remaining loan balance
  • Interest rate
  • Term length
  • Payment frequency 
  • Fees

Depending on your mortgage lender, the interest rate stated on your renewal statement cannot increase within 30 days of your mortgage’s maturity date. 

How To Renew Your Mortgage In Canada

If you still have an outstanding balance by the time your mortgage term comes to an end, you’ll need to renew your mortgage. Your lender will notify you when your term is about to expire so you have plenty of time to renew.

To renew your mortgage, take the following steps:

Step 1: Shop Early 

Even before your lender sends you notification that your mortgage term is going to expire soon, you should take it upon yourself to start shopping around for a mortgage with the best terms and lowest rates. 

Find out what the term expiry date is and start doing some research on all mortgage options about 4 months before you’re due to renew. This will give you plenty of time to scope out your options and give you the information you need to negotiate with your current lender. Otherwise, you can renew your mortgage with a different lender who can offer you a lower rate and more suitable terms. 

Step 2: Review Your Finances

Your financial situation could have changed throughout the duration of your current mortgage term. Maybe things are different for you now, which might mean the current terms and rate of your existing mortgage are no longer be suitable for you.

If that’s the case, you’ll want to factor in any changes in your financial life — such as a raise at work or an upcoming retirement — into your mortgage renewal decision. 

Step 3: Consider Your Mortgage Options

Before renewing your mortgage, there are a handful of important things to consider:

  • Can you pay your mortgage off sooner?
  • Have you come across extra funds to put toward your outstanding balance?
  • Do you want to change your mortgage payment schedule?
  • Do you want the flexibility to pay your mortgage off sooner without having to pay a prepayment penalty fee?
  • Are you ok with the interest rate you’re being offered?
  • Is there a chance that you might sell your home over the next 5 years?
  • Are you ok with your lender’s terms?
  • Are you satisfied with your lender’s service?
  • Do you want the option to tap into your home equity?

The answers to these questions can help you determine whether you’re satisfied with the terms of the mortgage renewal or if you’d like to make some changes.

Step 4: Choose The Offer That Works For You

Once you’ve shopped around and reviewed your finances, it’s time to make a final decision. So, should you accept the offer from your current lender, or should you negotiate new terms? Or, should you work with another lender altogether?

If you are satisfied with what your current lender is offering, simply sign the contract. Otherwise, set up some time to discuss the offer with your lender to negotiate a better offer. 

If you decide to switch to a different lender altogether, there is a little more work involved. That includes completing a mortgage application, as a different lender might have different qualifying criteria compared to your current lender. 

You might also be charged a few extra fees to make the switch, such as an appraisal fee to have your home’s value appraised by a professional, legal fees, and a discharge fee. Be prepared to cover these extra costs if your new lender doesn’t offer to pay for some or all of these charges on your behalf.

Renewing Your Mortgage With Your Current Lender

If you choose to stick with your current lender when you renew your mortgage, be sure to inquire about all the fees that might be listed in your contract so that you’re clear about what you’re paying. It’s their obligation to be transparent about how they arrived at the totals listed in the offer.

You might also want to inquire about the interest rate your lender is offering. If rates have recently decreased, consider renegotiating the rate specified in your offer. Even a fraction of a percent can make a difference in the amount of interest you end up paying over the life of your loan.

If you shopped around with other lenders in the months leading up to your mortgage renewal, you might have documentation showing the offers you’ve been given. You can use this information when negotiating with your current lender. 

Can You Switch Lenders When You Renew Your Mortgage? 

You have the option to work with a different lender when your mortgage term is up rather than staying with your current lender. This is a good option if you’re able to find a better deal somewhere else. 

If you choose to switch, your new lender must approve your mortgage application. As such, you’ll need to meet your new lender’s requirements, as mentioned.

Mortgage Renewal Costs To Look Out For 

As mentioned, there may be charges associated with switching to a new lender. Find out the costs associated with making this change, which can include any of the following:

  • Discharge fees
  • Registration fees
  • Transfer fees
  • Assignment fees
  • Appraisal fees
  • Admin fees

Your new lender might be willing to cover these costs on your behalf in exchange for their business, but that doesn’t always happen, so be sure to ask.

Renewing Your Mortgage And Its Effect On Your Mortgage Loan Insurance Premium 

If your loan amount is high relative to the value of your home, you may be required to pay mortgage default insurance on top of your principal and interest payments. 

More specifically, mortgage default insurance is mandatory in Canada if you make a down payment of less than 20% of the home’s purchase price. While you’re required to pay the premiums, the policy is meant to protect the lender and offset any risks if you make a low down payment.

When you switch lenders, you might have to pay a new mortgage loan insurance premium if any of the following applies to you:

Make sure to inform your new lender if you’re already paying mortgage loan insurance on your existing mortgage so you don’t accidentally pay your premiums twice. 

Tips For Renewing Your Mortgage

When it comes time to renew your mortgage, consider the following tips to ensure a good deal:

  • Get a head start. Start looking at all options for renewal a few months before the end of your current term. 
  • Negotiate for a better rate. Consider doing some wheeling and dealing with your lender for a lower interest rate, especially if you’ve shopped around and found other lenders that may be willing to offer you a lower rate.
  • Research market rates. Do your homework on current interest rates to find out if the rate you’re being offered is fair. 
  • Switch lenders. If your current lender is not providing you with the best offer after doing your due diligence, consider switching to a new one who is willing to offer you a better deal.

Mortgage Renewal FAQs

Can my lender refuse to renew my mortgage? 

Yes, your lender can refuse to renew your mortgage,  but they must inform you that your mortgage won’t be renewed well in advance of the term’s end date.  Lenders will want to keep their clients’ business if payments are being made on time. But borrowers who miss their payments regularly might find themselves without a renewal offer from their lender. In this case, the borrower must be given at least 21 days’ notice before the term expires.

Should I renew with my current lender or a new one? 

You may want to stick with your current lender for a few reasons:
  • It’s more convenient because you won’t have to start the application process over again with a new lender. 
  • Your current rate and terms are competitive compared to others. 
  • Your financial situation has worsened, as you may have trouble getting approved with another lender as a result. 

How long does it take to renew a mortgage?

It shouldn’t take any more than a few minutes to renew your mortgage with your lender over the phone if no additional documentation is required. 

When can I renew my mortgage? 

Most lenders allow borrowers to renew their mortgages anytime within the last 120 days of their existing mortgage term without penalty.

Final Thoughts

If you are nowhere close to paying off your mortgage in full and are not planning to sell your home or refinance your home loan, you’ll have to renew your mortgage. When that time comes, you have the option to stick with your current lender or move over to a new one who can offer you better terms. Either way, do your homework to make sure you’re getting the best deal.

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