Everything you need to know about mortgage renewal

Did you know that at the end of their term, many people decide to renew their mortgage exactly as it was, without even trying to improve their conditions?

Well, as we all know, mortgage renewal is not exactly thrilling. On the other hand, this is the perfect chance to renegotiate with your financial institution, alone or with your mortgage broker, in order to obtain terms that are more in line with your needs.

It's perfectly normal that your situation has changed over the past three, five or maybe even ten years. Rather than adapting to your mortgage, make your contract adapt to your new situation.

What is mortgage renewal?

When you take out a new mortgage with a lender, your contract will have a fixed term. During this term, called the mortgage term, your loan remains at the agreed interest rate. The term can vary between 6 months and 10 years, but the most common is for 5 years.

At the end of each term, you will need to renew your mortgage. You may need to renew it several times before paying off your loan in full. If your loan is paid off in full, you don't have to renew your mortgage.

By renewing your mortgage, you have the ability to customize your contract to suit your needs. You can change the length of the term, change your fixed rate to a variable rate, increase or decrease the frequency of your payments, etc. Now is a great time to explore your options and determine if your loan terms are still right for you.

Reassess your needs before your mortgage renewal

Before renewing your mortgage, take the time to reassess your financial needs and goals. Your long-term plans may have changed since your last negotiation with your financial institution.

Here are some examples of questions you can ask yourself to determine if the terms of your mortgage are still right for you or if you should make changes to your contract:

• How is your financial situation? Has it improved or deteriorated in recent years?
• Are you satisfied with the frequency of your payments? How would you like to pay off your loan faster? Does your budget allow it?
• Do you need additional funds that might require refinancing? For example, do you plan to do any major renovations in the near future? Would you like to buy a second home?
• Do you plan to move or sell your property soon?
• Are you satisfied with the services of your current lender? Should you change financial institution? What will be the possible consequences in the event of a transfer?

The objective of this questioning is above all to know if the financial strategy that you adopted when choosing your mortgage or the previous renewal is still relevant. Depending on the changes that have occurred or the plans you plan to do, it may be more appropriate to redefine the terms of your contract.

A few small changes to your contract can have a big impact. Have you become a parent and now have to dedicate part of your budget to the new member of your family? Reducing the amount of your monthly payments could be the difference between a healthy finances and a precarious financial situation. Have you been promoted at work? Boosting your payment frequency could save you a lot on interest in the long run.

So do not hesitate to negotiate the terms of your renewal with your financial institution or through your mortgage broker. Without your intervention, your mortgage could automatically renew for another term and be unfavourable to you.

When to renew your mortgage?

The key to maximizing the benefits of your mortgage renewal is to plan ahead. Start thinking about renewal a few weeks before your term ends. Some financial institutions even allow you to renew your mortgage 6 months before the end of your contract.

By contacting your mortgage broker four months (120 days) before the end of your term, you're chances of obtaining the best mortgage interest rate are much better. Indeed, this expert can “reserve” the current mortgage rate so that it is available when you renew your mortgage, which does not mean that you will take this rate, in particular if it continues to decrease thereafter. . The intervention of the mortgage broker therefore ensures that you get the best rate available at the time of your renewal.

In all cases, your lender must send you a renewal notice at least 21 days before the end date of your term. This notice must contain the following information, such as:

• The balance that remains to be reimbursed on the date of renewal
• The current interest rate
• The length of the term
• The frequency of payments
• All applicable fees for renewal

Note that if you decide to renew your mortgage before the period allowed by your financial institution, penalty charges may apply. You will need to make sure that your early renewal is worth it and that the savings you make will be more than the amount of the fees. The longer the actual maturity of your mortgage, the higher the penalty costs may be.

Accepting early renewal from your lender: a good idea to save?

Your lending institution has contacted you to offer to renew your mortgage and offers to lower your interest rate from 3.39% to 3.09%. At first glance, this offer may seem interesting to you, but should you take it?

In a case like this, it's best to exercise caution and not get carried away. The chances that your lender will be the one who can offer you the best rate is pretty slim. You can probably find a more competitive interest rate by looking at other financial institutions.

In addition, accepting an offer prematurely could prevent you from accessing a lower mortgage rate if it continues to fall by the date of your renewal. So, take the time to think before accepting the offer from your financial institution and do not hesitate to seek professional advice to guide you in your decision.

Shop around for your lender: mortgage transfer

Whether it is to improve your conditions when renewing your mortgage or because you are simply not satisfied with the service offered by your financial institution, you could decide to change lenders by making a mortgage transfer. Comparing the offers of different financial institutions could help you find better. You should never forget that you are not committed for life with your current lender. It's even in your best interest to shop!

Start evaluating your options a few months before the end of your mortgage term. This will give you plenty of time to do your research and compare the results. You don't have to wait for your lender's renewal letter to begin the process.

The new financial institution you choose will then have to approve your transfer request. The criteria she will use to approve your mortgage application may differ from those of your original lender. Also note that several fees may be associated with the transfer of your mortgage:

• Transfer or assignment fees from your current lender
• New lender's application fees (discharge, registration, etc.) ;
• Appraisal fees for the value of your property (if necessary)
• Other administrative costs

It's important you know all the costs involved in transferring your mortgage before proceeding. You can also ask your new lender if they would agree to pay some or all of the costs associated with the transfer.

The mortgage broker: your best ally for renewing your mortgage

In addition to helping you choose your mortgage for the first time, a mortgage broker can also provide you with valuable advice during your mortgage renewal period.

This will analyze your financial situation and explain the different options available to you. He will also negotiate with the various financial institutions to find the mortgage renewal offer that best meets your needs. Its intervention allows you to save time and money, absolutely free of charge!

To learn more about the role of mortgage brokers, see our article on the topic.

Confused About Your Mortgage? In addition to seeking advice from a mortgage brokerage professional, download our Practical Guide to Understanding Your Mortgage. Mortgage terminology will hold no secrets for you!

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