Not all mortgages are created equal, and many of the intricate details can hide deep inside your contract’s terms. This can make life for mortgage holders confusing and stressful, especially when it comes time for a mortgage renewal. Fortunately, with clear, expert guidance, you can enable yourself to make an informed decision.
Your mortgage renewal is an opportunity to review your finances, check the market, and find a new agreement that truly fits your life today. This gives you the power to secure better terms and save money over the long run.
What a Mortgage Renewal Means for You
Your Mortgage Term & Amortization Period
It is helpful to know the difference between your term and your amortization period. The term is the length of your current contract, while the amortization is the total time it will take to pay off your mortgage, such as 25 years. Your renewal is for a new term, not a new amortization period.
Your Renewal Statement Explained
Your lender will send you a renewal statement before your term ends. This document outlines the offer for your next term. It usually includes key details you should review carefully.
- Remaining Principal: The amount you still owe on your mortgage.
- New Interest Rate: The rate offered for your next term.
- Payment Details: How much your new payments will be and how often you will pay.
- Term Length: The duration of the new contract, such as three or five years.
- Fees & Charges: Any administrative costs that apply to the renewal.
To get a clearer picture of how a new rate might affect your budget, you can use a mortgage calculator to estimate your payments.
The 21-Day Notice Rule
In Canada, your lender must send you a renewal statement at least 21 days before your term ends. They are also required to let you know if they decide not to renew your mortgage. This notice gives you time to review their offer and explore other options.
Key Steps for a Smooth Mortgage Renewal
Following a few simple steps can help you find a mortgage that meets your needs. Don’t feel rushed into signing the first offer you receive. This is your chance to take control of your financial future.
Step 1: Review Your Current Mortgage & Financial Goals
Start by thinking about what you want to achieve with your mortgage. Do you want to pay it off faster with accelerated payments? Are you looking for a lower monthly payment to free up cash flow? For some, refinancing your mortgage is the right path, while for others, a simple renewal with better terms is enough. This is the perfect time to reassess your goals.
Step 2: Shop Around for Better Rates
You are not obligated to stay with your current lender. It pays to look at offers from other financial institutions. Exploring the market can show you what competitive rates and terms are available.
Step 3: Negotiate With Your Current Lender
Once you have offers from other lenders, you can use them as a starting point for a conversation. Contact your current lender and ask if they can match or beat a competitor’s rate. Many lenders are willing to negotiate to keep your business.
Step 4: Choose to Renew or Switch Lenders
With all the information in hand, you can make an informed choice. Decide whether to accept your current lender’s best offer or begin the process of switching to a new one. Remember to account for any fees associated with making a change.
Potential Renewal Roadblocks & How to Navigate Them
If you do not take action before your mortgage maturity date, your lender will likely make a decision for you. This often means you could end up with a product that is not ideal for your situation. In some cases, a renewal can even be denied.
The Risk of Inaction
Many lenders will automatically renew you into a new term if they don’t hear from you. This is often a six-month or one-year closed mortgage at their posted interest rate. These rates are typically much higher than what you could get by negotiating.
Some lenders may place you into an open mortgage instead. While this offers the flexibility to pay it off anytime, the interest rate is usually high. In rare cases, if your lender does not offer auto-renewal, they could demand you repay the entire mortgage balance at once.
Common Reasons for Denial
Although uncommon, a lender can refuse to renew your mortgage. This can happen for a few reasons, such as major changes to your finances or property.
Potential causes include:
- A new job with a lower income or a recent switch to self-employment.
- A large increase in your total household debt.
- A significant drop in your credit score.
- A history of missed or late mortgage payments.
- A substantial decrease in your property’s market value.
Your Mortgage Renewal Timeline & Key Questions
Timing is everything when it comes to your mortgage renewal. Knowing when to start and what to consider can help you make a smart decision without feeling pressured. Here are answers to some common questions.
When Should You Start the Renewal Process?
Start looking at your options four to six months before your term expires. This gives you plenty of time to research rates, gather documents, and negotiate. Many lenders will also hold a competitive rate for you for up to 120 days.
Should You Renew Early or Wait?
Renewing early can help you secure a good rate if you think interest rates are going to rise. On the other hand, waiting might be better if rates are expected to fall. The best choice depends on a balance of timing the market and your comfort with risk.
What If You Plan to Sell Your Home Soon?
If you think you might sell your home shortly after your renewal date, a short-term or open mortgage could be a good fit. These options can help you avoid the prepayment penalties that often come with longer-term closed mortgages, which is an important consideration when planning to purchase a new home. This gives you flexibility when you need it most.
How Mortgage Brokers in Calgary Can Simplify Your Renewal
You don’t have to navigate the renewal process alone. Working with a professional can make the experience smoother and may help you find savings. An independent expert can provide guidance tailored to your specific situation.
Get Access to More Lenders & Rates
One of the biggest advantages is choice. By working with a mortgage broker in Calgary, you align yourself with professionals who have established relationships with many different lenders, from major banks to credit unions and trust companies. This gives you access to a wider range of products and rates than your bank might offer.
Receive Help With Negotiation
A broker works on your behalf. Our experienced mortgage team can use their industry knowledge and relationships to negotiate for competitive rates and favourable terms. This can save you the time and stress of handling negotiations yourself.
Navigate Complex Renewal Situations
If you are facing a challenge—like a recent change in income or a dip in your credit score—a broker can be a great resource. They can help find a solution that works for you.
Your mortgage renewal is a key moment in your financial journey. With a little preparation and the right support, you can make a choice that sets you up for success.
Our team at Mortgage Connection is here to bring transparency and clarity to your mortgage experience. Contact us today to discuss your renewal options and move forward with confidence.
