Ultimate Guide to Mortgage Renewal

Welcome to our independent guide to the mortgage renewal process.

Follow our 5-step guide to feel confident you’ll get the best renewal deal. Our five steps to the mortgage renewal process are listed below. We explain why each step is essential, and then we provide tips for each step in the process:

1. Start Early

2. Consider Your Long-Term Plan

3. Do your homework

4. Ask for better terms

5. Let a mortgage broker do the work for you

Step 1.    Start Early

Start shopping for a new mortgage six months before your current mortgage is up for renewal. In an uncertain interest rate environment, one week can mean a quarter per cent difference in rate. Also, if your lender doesn’t have a renewal offer that fits your needs, starting early gives you time to look for another lender. You may not be able to switch your mortgage over until your actual renewal date arrives, but it’s best to give a mortgage broker time to find the best product and get all the paperwork ready so you’re not left scrambling at the last minute. One week isn’t enough time to switch, so, to be safe, you should allow at least a month.

Step 2.    Consider Your Long-Term Plan

Before you renew your mortgage, you should review your personal and financial goals to determine the type of mortgage you need. Key considerations:

• Is there a chance you could get a job opportunity in the next 3 to 5 years that would require you to move?

• Might you want to upgrade to a larger home because your household is growing?

• Are your kids moving out soon? Might you want to downsize or right-size your home?

• Is there a chance you could get a big bonus or receive an inheritance you might use to repay your mortgage?

If you know there’s a chance you’ll want to change homes, potentially move to a new city in the next few years, or you think you may want to pay down a large portion of your mortgage, then you may want to look for a shorter term or a lender with more favourable early repayment fees.

Since a mortgage is your most significant financial obligation, a renewal should be done with your financial goals and circumstances in mind. Once you know what you need, you’re better positioned to ask your current lender for a rate and engage a mortgage professional to look at other options.

Step 3.    Do your homework

Information is power. Before negotiating a better deal from your current lender, find out what other lenders offer. Plenty of websites post current rates, but advertised rates are usually only applicable to the best-case scenario (i.e., ‘click-bait’ rates are intended to get you in the door, but you may not get the advertised mortgage rate).

Many factors can influence the mortgage rate. Here’s what you want to look at once you know how long you want to lock in for:

• Rate

• Pre-payment Options

• Early Payoff Penalties/Fees

• Other Fees

If you speak directly to a bank or credit union, they can only advise you on their mortgages. Contact a mortgage broker if you want help quickly comparing your options across many lenders. Remember, there is no penalty for switching lenders on the renewal date.

Click on this link for more information on the features of a mortgage that are negotiable and how they impact your cost of borrowing.

Step 4.    Ask for better terms

The renewal letter that comes in the mail is seldom the best rate available. Yes, signing and returning the letter is quick and easy, but you will pay for the convenience with a higher interest rate.

Always ask your current lender for a better rate. Some people feel uncomfortable negotiating a better renewal deal. If this is the case, get a mortgage broker to negotiate with the available lenders and beat the offer in your renewal letter.

Remember to keep the personal and financial objectives from Step 2 in mind. You are not just negotiating the rate. You are looking for a combination of:

• Term

• Amortization Period

• Rate Type (Fixed or Variable)

• Payment Schedule Flexibility

• Pre-payment Options

• Early Payoff Penalties/Fees

If you take the route of switching lenders, a mortgage broker may become your best friend. Rather than meeting all the lenders, a mortgage broker can pull your credit report once and quickly identify the lenders who best fit your objectives.

Step 5.    Let a mortgage broker do the work for you

Time is valuable. A mortgage broker will do the work if you don't want to research lenders, rates, and features.  Mortgage brokers don’t charge you anything for most financing since they are usually paid a commission or finder’s fee by the lenders. According to the Bank of Canada research, people who use a mortgage broker typically save more money.

Each month, we update our forecast of Canadian mortgage rates and our real estate price forecasts to provide you with the latest rate/price information for your area.

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