Mortgage Renewal Process in Canada

At the end of your mortgage term, you have two options if you still owe a balance. You can pay out the remaining balance, or you will need to renew your mortgage for another term. This mortgage renewal process is a great time to refocus your financial goals and ensure that you are getting the best possible deal on your loan. Naturally, your current lender will send out a renewal statement and try and get you signed up for another term. However, this is the perfect time to shop, compare and ensure you are signing on for a mortgage term and interest rate that is competitive and works for your financial situation. Here is some information on how to be proactive when it is time to renew your mortgage.

Start shopping four months before renewing your mortgage

When it comes to figuring out when to start shopping when renewing your mortgage, it all comes down to timing. You will want to take your mortgage term’s maturity date and then count back 120 days, or four months. As many lenders allow you to break early, this date is essential, as you increase mortgage options including resigning with the same lender and securing a new interest rate. If you are looking for options or want to see what is out there, start with a mortgage rate calculator.

Our calculator will let you run some numbers and give you an idea of the area you want to aim for in terms of interest rate and your preferred loan type. If you are working by yourself, you may also want to check a few online resources to figure out the current prime rate and the offers from a few of the top lenders.

If you are working with a mortgage broker, then four months out from renewal is an excellent time to connect. This will give them enough time to compare, contrast and provide you with the best options moving forward.

This comparison phase will allow you to know the current rates, get an idea of mortgage types that are hot, and provide you with all the data that you need when you are going to renew your mortgage.

Consider your short-term and long-term goals

When it comes to renewing a mortgage, you need to consider the financial burden that a mortgage represents over its amortization period. A renewal provides you with a bit of a reset and an opportunity to look at what your financial goals are over the next few years of your term.

For instance, you could look to increase your mortgage payments if you are making more money or think that you will over the loan’s life. You can switch your payment frequency from monthly to accelerated bi-weekly. You could put down a lump sum payment and then keep your monthly payment the same. The possibilities are endless, but when you renew your mortgage, you have that opportunity to make changes for free with your lender or the bank.

During this renewal process, you should consider the mortgage term, the interest rates, and the mortgage type. A variable rate might be the fit, but depending on the prime rate and the economy, a fixed rate might also be the right fit. Do your homework, save money and keep moving towards the goal of being mortgage free faster.

Things to consider

When it comes to figuring out your mortgage needs, you need to consider the mortgage products on the market. So, to help guide you in your search for the ideal product, here are some things to consider before your current term ends.

Monthly payments

First and foremost, how are you finding your monthly payments? Could you afford to increase your mortgage payment to lower the overall fees and costs? Or, are you looking to pay off other higher interest debt first, such as credit cards or other loans?

Pay and other finances

Second, are you planning for a pay raise, a new job, or some other lump sum of money? If so, it might be an idea to put that money towards a lump sum payment on your mortgage amount before you re-sign for a new mortgage term.

Is your mortgage ending soon?

Third, you will want to figure out where you are in regards to your current mortgage. Will you have money left over at the end of your term or pay off your mortgage before your current term ends. If so, you might want to consider other mortgage types or consider the costs associated with pre-payments or other vehicles to speed up your mortgage payments. You can review these vehicles in the terms and conditions section of any mortgage lender.

Refinancing?

Fourth, you will want to consider if you are thinking about refinancing or borrowing against your current mortgage. You may want to do a renovation or even buy an income property, but nonetheless, you will want

Planning to sell before your renewal date?

Finally, you will want to consider if you will sell or move from your current location. Not all mortgages are built to be portable, and finding that ideal mortgage might take a little work. If you plan to move, you will want a mortgage lender that offers a portable or assumable mortgage.

Type of mortgage

Depending on a few factors, a variable or fixed rate might be the right fit for your situation. Variable mortgages are great for those who think the market will continue to drop, and do not want to be locked-in to a higher interest rate. While fixed mortgages protect the borrower, and allow people to take advantage of low interest rates and security for years on end. Use mortgage calculators to do the math, and see what is the ideal type for your mortgage renewal.

Be prepared to renew your mortgage in the last 30 days

By law in Canada, a lender will need to send you a mortgage renewal statement within 21 days of your mortgage term ending. Typically, lenders will send it earlier than this and provide you with their lowest posted rate for 30 days before the loan hits maturity. This will give you some breathing room, but if you are only starting in the last 30 days, you will have to rush and talk to a branch, broker or lender asap. Otherwise, you should already be negotiating or getting the paperwork from the branch or broker.

Last but not least, sign!

The last step of the renewal process is signing the dotted line. It is a bit of a process to complete, but whether you virtually sign or visit a branch, it will finally be done! Whether you get a variable or fixed mortgage, the most important thing is that you get an excellent deal for your mortgage.

Final thoughts

No matter if you are a few years out or a few months out, you will need to be ready to act when it is renewal time. It will sneak up on you, and if you are not prepared, it can be a scramble. Whether you research mortgage sites or contact a broker, your mortgage renewal matters, and it is best to call your broker or start the process early.