Mortgage renewal process
At the end of your mortgage term, so long as you still owe a balance, you will need to renew your mortgage. With each mortgage renewal comes the opportunity to assess the features and status of your current mortgage and and determine whether it’s still the best fit for your financial situation and goals. Your current mortgage provider will send you a renewal slip in the mail that you could easily sign and send back – but if you want to ensure you’re getting the most out of your mortgage, we suggest taking this proactive approach with your next mortgage renewal:
1. Start shopping 4 months before your term is up
Mark your current mortgage term’s maturity date on the calendar, then count back 120 days (~4 months) and mark that too; this is the date most lenders will let you start the early mortgage renewal process, meaning you could renew early with your current lender without having to pay a prepayment penalty (for breaking your term early). If you’re not ready to sit down with your mortgage broker or lender on this day, you can at least start researching your options online. By finding out which lenders are offering what, in terms of mortgage rates, prepayment options and other terms and conditions, you’ll be better prepared to negotiate when you are ready to renew.
2. Consider your financial goals
Let’s face it: a lot can happen throughout your current mortgage term. Your financial goals at the beginning of your current mortgage term may no longer match up with your financial situation today. For example, you could have received a substantial raise at work, lost some income, or even retired. You may have had a baby, or need to pay for your child’s university tuition. If there’s any chance you’ll need to move in the next 5 years, that should be factored into your decision. Or, if you think you want to access some equity, you should be mindful of that too. Whatever your needs are, make sure you consider them when choosing a mortgage rate, term and product.
3. Outline your mortgage needs
Along with your other financial goals, you should make a list of what you’re looking for in a mortgage product. To start, ask yourself a few questions:
- Does your monthly budget have room for you to increase your mortgage payment amount? (If so, review the monthly prepayment options in the terms and conditions.) Increasing the size or frequency of your mortgage payments can help pay down your principal faster, potentially saving thousands of dollars in interest over the course of our mortgage.
- Do you think you’ll receive any bonuses or inheritances that you could put towards your mortgage? (If so, you’ll also want to look at the lump sum prepayment options.)
- Do you think you’ll have the option to pay off your mortgage entirely, in this next term? (If so, consider the prepayment penalties that go with fixed vs. variable rate mortgages.)
- Do you think you will want to borrow more money from your lender during this next term? (If so, you’ll again want to consider the prepayment penalties involved in a refinance, or look at collateral mortgages instead.)
- Is there any chance you’ll be selling your home and/or moving in the next 5 years? (If so, you may want a mortgage that is portable or assumable.)
4. Be ready to renew in the last 30 days
By law, your current lender has to send you a mortgage renewal statement at least 21 days before your term is up, but they will usually mail you a renewal offer for their lowest posted rate that is good for the 30 days before maturity. By extending that offer for 30 days, you’re protected from any potential rate increases during that time. However, you should have done enough research by now to know whether or not it’s actually the best mortgage rate on the market – and if not, you’re perfectly within your right to try to negotiate!
Keep in mind, even if you sit down with your current lender to negotiate their offer, it’s unlikely they’ll be able to give you the best mortgage rate. So, in your last 30 days, you should also make an appointment with a mortgage broker to discuss what other lenders can offer you.
5. Make a decision
After shopping around, considering your financial goals, outlining your mortgage needs and receiving a mortgage renewal offer from your current lender, it’s finally time to make a decision. The last question you’ll need to ask yourself is who is offering you the best mortgage rate and product: your current lender or another lender? If you decide to stay with your current lender, you can either choose to sign and return the mortgage renewal offer they sent in the mail, or sit down and try to negotiate a better offer in their offices.
Switching providers will require a little more paperwork, but you’ll find that doing so will give you access to better mortgage rates. Just be prepared to submit a mortgage application, as the new lender’s qualifying criteria might be different from that of your current lenders. There may also be fees involved with making the switch, including an appraisal fee to verify your property’s value ($150-$500), a discharge fee ($5-$395), an assignment fee ($25-$300) and legal fees (up to $1,500). Certain mortgage brokers and lenders will offer to pay for some or all of these fees when you bring your mortgage to them but others won’t, so you should be prepared to pay for them with cash.
Borrowers considering switching to a new lender at renewal should also keep in mind that they’ll need to pass the mortgage stress test, which requires them to qualify at a rate of either 5.25% or their contract rate, whichever is higher. As this may impact your overall affordability and how much mortgage the lender is willing to finance, it’s an important consideration.