Mortgage Renewal in Canada: What You Should Do Before You Renew

If your mortgage is coming up for renewal, you’ll probably get a letter from your lender telling you what rate they’re offering and asking you to renew.

It can be very tempting to just sign it and move on.

After all, you already have the mortgage. Your payments are set up. You know the lender. Why make it more complicated?

But your mortgage renewal is actually one of the best times to stop and look at your options.

You don’t have to stay with your current lender, and the rate on your renewal letter isn’t necessarily the best rate available to you.

When should you start looking at your mortgage renewal?

I recommend starting the conversation a few months before your mortgage maturity date.

You don't need to wait until your lender sends your renewal letter. In fact, waiting until then can leave you with less time to compare options.

Your renewal is a good opportunity to look at:

What rates are available
Whether a fixed or variable mortgage still makes sense for you
Whether you want a different mortgage term
Whether you want to increase or decrease your amortization
Whether you want to consolidate other debt
Whether you want to make a lump-sum payment
Whether another lender has a better option for your situation

The Financial Consumer Agency of Canada also recommends shopping around before renewing rather than automatically accepting your existing lender's offer.

Do I have to renew with my current lender?

No.

You can switch your mortgage to another lender when your term is up.

The new lender will still need to approve the mortgage, so switching lenders isn't quite as simple as moving a bank account from one institution to another. The new lender has to review the application and make sure you qualify under its lending guidelines.

There can also be costs involved with switching, although some lenders will cover some or all of those costs.

One thing I always look at is whether the new mortgage is actually saving you money once all of the costs are considered. A slightly lower rate doesn't automatically mean a better deal if you're paying significant fees to get it.

Should I just take the rate my lender offers me?

Not without checking.

Your existing lender knows you already have the mortgage, which makes the renewal process pretty easy. But easy doesn't necessarily mean you're getting the best available option.

It's worth comparing the renewal offer against other lenders before you sign.

Sometimes your existing lender will also improve the rate if you tell them you've been offered something better elsewhere.

And sometimes staying with your current lender really is the simplest and most practical option.

The important part is knowing what your alternatives are first.

What if my financial situation has changed?

This is a big one.

If your income, employment, credit, debts or overall financial situation has changed since you originally got your mortgage, don't assume that renewal will work exactly the same way as your original mortgage.

For example, someone who is now self-employed, has taken on additional debt, has gone through a separation, or has had a significant change in income may have fewer options with a traditional lender.

On the other hand, if your finances have improved, you may have more options than you did when you originally got the mortgage.

This is one of the reasons I prefer to look at the whole picture rather than just comparing two interest rates.

What happens if I want to increase my mortgage at renewal?

A renewal and a refinance are not quite the same thing.

If you're simply renewing the existing mortgage for approximately the same amount, that's generally a straightforward renewal.

If you want to take additional money out of the property, consolidate debts, change the structure of the mortgage, or make another significant change, it may be treated as a refinance instead.

That can mean different qualification requirements and potentially different costs.

So if you've been thinking, "Maybe I'll just pull some money out when I renew," it's worth discussing that before you sign a renewal with your current lender.

How long should I renew for?

There's no one mortgage term that is right for everyone.

A one-year, two-year, three-year, four-year or five-year term can all make sense depending on your circumstances and what you're trying to accomplish.

This is where I think it's important to look beyond the rate.

For example, someone who expects to sell their home in the next couple of years may not want to lock themselves into a long-term mortgage just because the rate looks good.

Someone else may value the stability of a longer fixed term and not want to worry about where rates go next.

Your mortgage should fit what you expect to happen with your life, not just what the rate happens to be on the day you renew.

What happens if I don't do anything?

If you have a federally regulated lender, you should receive information about your renewal before your term ends. The lender must provide a renewal statement at least 21 days before the end of the existing term.

Some mortgages may automatically renew if you don't take action.

That doesn't mean you should ignore the renewal.

If you simply let the mortgage renew without comparing your options, you may miss an opportunity to negotiate a better rate, change your mortgage structure or move to a lender that better fits your current situation.

What should I do before my mortgage renewal?

If your mortgage is coming up for renewal, I'd suggest doing these five things:

Find out your exact maturity date.

Don't rely on your lender's renewal letter. Know when your current term actually ends.

Find out your current mortgage balance.

This helps when comparing offers and deciding whether you want to make a lump-sum payment.

Look at your current financial situation.

Has your income changed? Have you taken on new debt? Are you self-employed now? Are you planning to sell? Do you need to access equity?

These things can affect which mortgage options are available.

Compare more than one option.

Look at what your existing lender is offering, but also see what other lenders are offering.

Don't compare rates without looking at the mortgage itself.

The lowest rate isn't necessarily the lowest-cost mortgage once you consider penalties, restrictions, fees, prepayment privileges and the term you're committing to.

The bottom line

Your mortgage renewal isn't just a piece of paperwork you need to sign.

It's an opportunity to take another look at your mortgage and make sure it still fits your situation.

And you don't need to wait until your lender sends you a renewal offer to start.

If your mortgage is renewing in the next few months and you're not sure whether you should stay with your current lender, switch lenders, refinance or simply renew as-is, that's exactly the kind of thing a mortgage broker can help you sort through.

If you'd like me to look at your upcoming renewal, send me your current mortgage statement and renewal date and I can take a look at what your options may be.

Need help with your mortgage renewal?

Reach out to review your options before you sign your renewal.