Mortgage renewal time is here, and you're weighing two options: stick with your current lender or switch to a new one. Simple as that choice may seem, there are several key factors homeowners should weigh before signing on the dotted line.
The mortgage renewal process can be straightforward if you know your options and how far in advance you need to act.
How Mortgage Renewal Works in Canada
In Canada, Federally-regulated institutions are required to send your renewal statement about 3 weeks before your mortgage renewal date. That's a tight window – not much time to properly shop around and compare your options before you need to decide.
Finding a new lender or a better mortgage rate can take several months, so mark your renewal date on your calendar and start the process approximately 3 to 4 months early. This is the negotiation period where your goal is to get a cheaper or the same mortgage rate you currently have, or to find a new lender that gives you better conditions, such as the opportunity to extend your amortization period or make a lump-sum payment.
Switching Lenders at Renewal Time
Switching to a new lender requires re-qualifying for a new mortgage and may include home appraisal and discharge fees – however, many lenders absorb these costs. Re-qualifying for a new mortgage takes time and is more likely to happen months ahead of your renewal deadline, and will require a lawyer to handle discharge and other fees.
While switching to a new lender means you require taking a Stress Test, it's only required if you are refinancing. Mortgage refinancing involves breaking your current mortgage contract and starting a new one. Changing to a new lender means you're refinancing your loan and can potentially get a lower rate.
How to Avoid a Higher Mortgage Rate
Your mortgage renewal period is one to five years, so homeowners should lock in a good rate. Never accept your renewal rate as given – your lender wants you to renew your contract, which will likely be at a higher rate than what you're paying now.
There are three ways to avoid “rate shock,” the feeling homeowners get when they have to pay higher monthly payments after renewing their mortgage contract: extend your amortization period, pay a lump sum, or adjust your monthly spending to match what you owe.
Planning Your Mortgage Renewal Approach
Renewing your mortgage means your contract is expiring and you need to re-sign or re-qualify. At this point, you can change your payment frequency and rate type before you agree to new terms.
A few renewal strategies include:
- Shop around: Tell your lender you're looking around for a better rate and/or better options.
- Consider a broker: Mortgage brokers don't charge you extra fees, as they work on commission, compare lender rates, and can often negotiate a better lending rate.
How a Mortgage Broker Works For You
Renewing your mortgage with a broker is like going to a tailor when you're suit shopping: They look out for the best fit and options based on what's best for you versus a big bank that chooses your suit off the rack.
Your bank's renewal offer is easy to sign and forget, but that convenience doesn't guarantee you're getting the best rate.
Consider a mortgage broker for these reasons:
- Multiple Lenders, More Options: A bank offers only its own rates. A broker compares across lenders to find you a better deal.
- No Guaranteed Loyalty Discount: Banks don't reward long-term customers by default at renewal. A broker checks whether you're actually getting a competitive offer.
- Advice Not Tied to One Lender: A broker recommends what fits your finances, not what's on one bank's shelf.
- Room to Renegotiate: Beyond the rate, a broker can revisit your term, payment schedule, or amortization across multiple lenders.
- Less Legwork for You: A broker handles the comparison, negotiation, and paperwork.
What Happens If My Financial Situation Has Changed?
At renewal time, if your financial situation has changed: you have lower income due to retirement, unemployment, or short-term leave – consider switching to an alternative lender. B-lenders, for example, may offer you lower rates. In this situation, you'll be required to show your income or bank statements to reassure the lender that you can pay back your loan.
Ready to Renew Your Mortgage?
If you're a homeowner with a mortgage, renewing it is inevitable when your contract expires or until you pay off your home. Staying with your current lender or switching to a new one is a key decision homeowners have to make.
Don't settle for your lender's default renewal offer. Let us shop around for you to secure a better rate and terms that fit your needs. We make the mortgage renewal process easier, faster, and more cost-effective. Contact Get A Better Mortgage today for mortgage renewal advice.
