MORTGAGE RENEWAL or REFINANCING

When your mortgage term comes to an end, you’ll need to pay off your mortgage or renew it for another term. This is a good time to review your needs and make sure you have the right mortgage if your needs have changed.

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Is your mortgage coming up for Renewal?

Don’t be too quick to sign that mortgage renewal letter. Over 70% of Canadian mortgage holders just sign that papers and what is the most common result? A higher interest rates and a mortgage product that likely not be best suited to their interests.

Ask the following questions to help you find the right mortgage:

  • Does your budget allow you to increase your mortgage payments? If yes, you can pay off your mortgage sooner and save on interest charges?

  • Do you want to change your payment frequency? For example, switching from monthly payments to accelerated bi-weekly payments may let you pay off your mortgage more quickly.

  • Do you think you’re likely to make additional prepayments?

  • Are you satisfied with the services offered by your current lender?

  • Do you want to consolidate other debts that have higher interest rates and increase the amount of your mortgage loan?

60%

Borrowers Do a Lot of Research Arranging a Mortgage

42%

Borrowers Do a Lot of Research Renewing their Mortgage

22%

Borrowers Renew their Mortgage Without Doing Any Research

When can I renew my mortgage?

You may qualify to renew your mortgage as early as 120 days before maturity. If you do, lenders often waive any prepayment charges or other fees, depending on the mortgage type and other incentives.

Thirty days before renewal, time gets tight and you should take action. Leave at least 3 weeks to complete the paperwork.

You don’t have to renew your mortgage with the same lender. You can choose to move your mortgage to another lender if it offers you better terms and conditions.

Shop around

Start shopping around a few months before the end of your mortgage term. Contact various lenders and mortgage brokers. Check if there is a mortgage option with terms and conditions that better suit your needs. Don’t wait until you receive the renewal letter from your lender.

If you don’t take action, your mortgage may automatically be renewed for another term. This means that you may not get the best interest rate and conditions. If your lender will automatically review your mortgage, it will say so in the renewal statement.

Mortgage renewal problems

If you’ve been making your payments on time without fail, you shouldn’t have a problem at renewal time. In some cases, however, your lender can choose not to renew your mortgage. If your credit rating has dropped significantly during your mortgage term, for example, you could find yourself scrambling to find a new lender if your current lender no longer finds you to be a worthy borrower. There are other alternatives and you can always take your mortgage to another lender. Although you will probably end up paying higher interest rates. Exactly the same as you would have done if you had poor credit history at the time when you secured your mortgage.

You could also face less favourable terms if your financial situation as a whole is different at the time of renewal than it was when you got your mortgage last. For example, if you and your partner were salaried employees when you got your mortgage but one of you has started your own business or one of you is receiving employment insurance, then that will come into play as well. If you know your mortgage is coming up for renewal soon, do whatever you can to stabilize your finances. Just as you did when you first submitted paperwork to your lender.

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. What is the last question you’ll need to ask yourself? – 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 ready to submit a mortgage application. Don’t be surprised if new lender’s qualifying criteria might be different from that of your current lenders. There may also be fees involved with making the switch. For example 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.

Don’t forget your broker

Brokers aren’t just helpful when you get a mortgage for the first time. They’re able to help during the mortgage renewal process in exactly the same way they did the first (or second) time around: by shopping for the best rates among multiple lenders and doing the legwork for you. Contact your broker up to a few months before the end of your term so they can get going on the process for you. Even if you like the interactions that you’ve had with your current lender and you want to stay with them, a mortgage broker can be extremely helpful during the negotiation process, making sure that you still get the best terms and rates possible.