Renewing and Renegotiating Your Mortgage

Renewing and Renegotiating Your Mortgage

Written by Caitlin Wood
Last Updated November 26, 2021

When you purchase a house you typically need to get approved for a mortgage and then sign a mortgage agreement. This agreement stays in effect for a specific period of time; this is your mortgage term. The term you sign when you first purchase your house doesn’t last until you’ve paid back your mortgage completely. A term is usually 5-10 years and then you need to renew or renegotiate with your lender for a new mortgage term.

If at the end of your mortgage term you’re still satisfied with your agreement and simply want to continue making payments as before you can renew your mortgage. But if your financial situation has changed or if interest rates have changed and you wish to take advantage of them, you can always renegotiate your mortgage before your term ends.

Breaking your mortgage contract could potentially cost you quite a lot, therefore it’s extremely important that you understand the process before you make any decisions. We’ve compiled all the information you need to make the best choices when it comes to renewing or renegotiating your mortgage term.

Renewing Your Mortgage

If you’re happy with your current mortgage and wish to renew it, take a look at the following information. This should help you get through the process as smoothly and quickly as possible.

Your Lender’s Role  

If you currently have a mortgage agreement with a federally regulated financial institution then you should receive a renewal statement at least 21 days before your term ends. This statement will contain the same information that is in your mortgage agreement/ contract.

  • The remaining principle or balance
  • The current interest rate that you’re paying
  • Payment frequency
  • The term
  • Any additional charges or fees that apply to your mortgage

If your current lender decides that they do not wish to renew your mortgage they legally must notify you at least 21 days before your term ends.

When to Shop Around

It’s always in your best interest to shop around for a new mortgage lender if you’re unhappy with your current one. Don’t wait until you get your renewal notification, start shopping around at least a couple of months before the end of your term.

For the average Canadian, a mortgage is their largest expense. So if you’re not happy you need to take an active role in finding a new lender that will be able to provide you with a term and interest rate that better suits your current financial needs.

Renewing With Your Current Lender

You’ll need to reassess your finances and needs before you sit down with your lender to renew your mortgage. Here are some questions you should ask yourself while reassessing your needs:

  • Could you afford to increase your payments so that you can save in interest?
  • Would increasing your payment frequency be beneficial to you?
  • Are your happy with your lender and the services they provide?
  • Are you looking to consolidate other debt you might have?

Renewing With a New Lender

If you aren’t happy with your current mortgage lender then you don’t need to stay with them. You can always choose to switch to a new lender who offers conditions that better suit your needs. You’ll need to apply for a mortgage with your new lender and they’ll need to approve your application, similar to when you applied for your first mortgage. Switching lenders often comes with its own set of costs so always make sure you ask before you make your final decision, if the cost is too high it may not be worth it for you.

Breaking Your Contract

It’s possible that during your mortgage term you realise that your lender no longer meets your needs, if this happens you may want to consider renegotiating your agreement and change the conditions of your mortgage. Renegotiating your mortgage will cost you so you need to decide whether it’s worth it.

Breaking Your Mortgage Agreement

Breaking your agreement could cost you so you need to beware of the fees before you decide. Always ask your current lender and your new lender if they are willing to waive or cover part of the following fees:

  • A prepayment charge
  • Administration fees
  • Appraisal fees
  • Reinvestment fees
  • Legal and/or registration fees to release your old mortgage and register a new one.

Prepayment Charges

When you’re able to repay your mortgage sooner than expected or wish to break your mortgage agreement because you want renegotiate your conditions, you’ll typically be charged prepayment fees. These fees exist because you’ll be paying your lender less than they originally calculated because you won’t be paying as much interest as you would have if you had taken the full amount of time to pay off your mortgage.

Simply put, if you pay off your mortgage faster you aren’t charged as much interest, this means your lender is making less money than they originally thought they would. This is where prepayment charges come in, you lender will charge you for prepayment so they can recoup some of the money they are losing.

This is something that you definitely need to take into consideration before you decide to break your mortgage contract as the cost may not be worth it. Always double check your mortgage agreement as some lenders offer prepayment privileges, this means you lender will allow you to prepay up to a certain amount without being charges any fees.

The Advantages and Disadvantages

To help you make the best choice concerning the renewal or renegotiation of your mortgage here a few of the advantages and disadvantages you should take into consideration.

Advantages

  • The possibility of smaller payments.
  • Not adding extra fees and prepayment charges means you’ll pay off your mortgage on time.
  • You could negotiate a lower interest rate and save yourself a lot of money.

Disadvantages

  • Fees or prepayment charges could add up to more than any savings you might get
  • If selling your home is in your future going through the process of renegotiating might not be worth it.
  • If interest rates continue to go down you may want to wait to try to get the lowest possible rate.

While this is a lot of information to take in, it’s all extremely important should you decide to renegotiate your mortgage or stick to a simple renewal. In the end the choice is up to you so make sure that you know what you need and want and work towards getting the best mortgage and the best conditions for you.


Rating of 5/5 based on 2 votes.

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

Click on the star to rate it!

How useful was this post?

Research & Compare

Canada's Loan Comparison Platform

Largest Lender Network In Canada

Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.

Make Smarter Borrowing Decisions

Whether you have good credit or poor credit, building financial awareness is the best way to save. Find tips, guides and tools to make better financial decisions.

Save With Loans Canada

Special Offers

Earn 5% Cash Back With Neo

Earn 5% Cash Back With Neo
No annual fee!

Earn an average 5%¹ cash back at thousands of partners and at least 1%² cashback guaranteed.

View Offer
Build Credit With Refresh Financial

Build Credit With Refresh Financial
Popular

Build credit while spending money with the Refresh Financial VISA card.

View Offer
Build Credit For $7/Month

Build Credit For $7/Month
Popular

With KOHO’s prepaid VISA card you can build a better credit score for just $7/month.

View Offer
Industry Spotlight

What's happening with Canada's credit industry?

Lexop ⎯ Improving The Collection Process By Putting The Consumer First

Lexop ⎯ Improving The Collection Process By Putting The Consumer First

In an industry that doesn’t often put the consumer first, Lexop is changing the way companies manage their collection process. 

Read Post
Locator
Find The Best Rate
In Your Region
OR
Best Personal Loan Provider by Greedy Rates
Icon

Confidential & risk-free

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.

When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.

Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. Nothing on this website constitutes professional and/or financial advice.

Your data is protected and your connection is encrypted.

Loans Canada Services Are 100% Free. Disclaimer

Keep Track Of Your Credit Score

Subscribe with Credit Verify to monitor your credit rating and get your free credit score.