Your mortgage term is coming to an end, and that renewal notice has arrived. Before you sign on the dotted line, remember that this is a major financial moment. It’s a chance to look at your finances, your goals, and your options to find a better deal. As our team of experienced experts always says, an informed decision is a powerful one.
Instead of simply accepting the first offer from your current lender, take some time to explore what’s available. The key to a successful renewal is to proactively shop around and negotiate for terms that work for you. This step, especially when guided by a dedicated residential mortgage broker, can help you save a significant amount of money over your next term and beyond.
Know the Renewal Process & Your Finances
When your term ends, you have to either pay off your mortgage or renew it. Your lender sends a renewal statement at least 21 days before your term expires. Don’t let it renew automatically—you could miss out on a better interest rate or more flexible features.
What’s in Your Renewal Statement
Your statement breaks down the offer from your current lender. You can expect to see details like:
- Your remaining principal balance
- The new interest rate
- The proposed term length
- Your new payment amount
- Any applicable fees
Questions to Ask Yourself
Your life has likely changed since you first signed your mortgage papers. Before you renew, think about your current financial picture and future plans. Ask yourself a few questions to get started.
- Can I afford larger payments to pay the mortgage off sooner? Our handy mortgage calculator can help you run the numbers.
- Do I plan to move or sell in the next few years?
- Could I benefit from refinancing to consolidate other debts into my mortgage?
- Am I happy with my current lender?
Explore Your Options for a Better Rate
You are not obligated to stay with your current lender. In fact, shopping around is one of the most effective ways to find a better rate and terms. It’s a good idea to start looking a few months before your renewal date to give yourself plenty of time.
Compare Offers from Different Lenders
Reach out to different banks and credit unions to see what they can offer you. You can also work with experienced mortgage brokers in Calgary who can compare dozens of options for you. This approach saves you time and can help you find a more competitive offer.
Negotiate with Your Current Lender
Once you have other offers in hand, you can go back to your current lender. Let them know you’re exploring your options and have found a better rate elsewhere. They may be willing to match or beat a competitor’s offer to keep your business.
Choose a Fixed or Variable Rate
Your renewal is also a chance to switch between a fixed and a variable interest rate. The right choice depends on your comfort with risk and your personal financial outlook. Both options have their own advantages.
Fixed-Rate Mortgage
With a fixed-rate mortgage, your interest rate and payment amount are locked in for the entire term. This provides stability and predictability, which makes budgeting straightforward. You always know what your payment will be.
Variable-Rate Mortgage
A variable rate fluctuates with the market’s prime rate, meaning that your payments could go up or down. While they come with more uncertainty, variable rates have often been lower than fixed rates over the long run, so variable rates can be a good fit if your budget can handle potential payment changes.
Pay Your Mortgage Faster & Consider a Switch
Renewal is the perfect time to adopt strategies that help you become mortgage-free sooner. By paying down your principal balance faster, you can reduce the total interest you pay over the life of your loan. There are a few ways to do this.
Prepayment & Payment Options
At renewal, you can often make a large lump-sum payment on your mortgage principal without a penalty. You could also increase your regular payment amount. Switching from monthly to accelerated bi-weekly payments is another popular strategy that can help you pay off your mortgage years earlier.
The Costs to Switch Lenders
If another lender offers you a much better deal, it might be worth switching. Just be aware of the potential costs involved, which can include:
- Discharge or transfer fees from your current lender
- Setup fees with the new lender
- An appraisal fee to confirm your home’s value
Review Your Credit & Insurance
Your overall financial health is important during renewal, especially if you decide to switch lenders. A new lender will review your income, debts, and credit score to approve your application. It’s also a great time to review any insurance tied to your mortgage.
How a Consumer Proposal Affects Renewal
If you have a consumer proposal on your credit report, renewing with your current lender is often straightforward if your payments are up to date. Switching to a new lender can be more difficult. Knowledgeable mortgage brokers in Calgary can help you find lenders who are more flexible in these situations.
Re-Evaluate Your Mortgage Life Insurance
You may have been offered mortgage life insurance from your lender when you first got your mortgage. Renewal is a good time to look at this policy and see if it still serves you.
An individual life insurance policy offers more flexibility. You choose the beneficiary and the coverage amount, and the policy isn’t tied to your mortgage loan. You can compare options to see what makes the most sense for your family’s needs.
Navigating a mortgage renewal can feel like a big task, but you don’t have to do it alone. At Mortgage Connection, our team is here to bring clarity to the process. Contact us today to discuss your renewal and find a solution that fits your life.
