When your mortgage term is about to end, you have a big decision to make. This is more than just paperwork—it’s a chance to review your financial situation and ensure your loan still works for you as part of your mortgage renewal strategy. If you don’t take action, you could face higher interest rates or other unwelcome complications.
If you don’t renew your mortgage on time, your lender may place you into a new term with a much higher interest rate or, in some cases, could demand full repayment of the loan. Taking a proactive approach is the best way to protect your financial well-being and avoid costly surprises. Our team is committed to helping you make fully-informed decisions on your mortgage.
The Mortgage Renewal Process in Canada
In Canada, a mortgage is typically paid off over a long period, like 25 years—this is referred to as the amortization. However, your mortgage contract is broken into shorter periods called terms, which often last between one and five years. At the end of each term, you must renew your mortgage, switch to another lender, or pay the remaining balance in full.
Your Mortgage Term & Renewal Notice
Your lender must send you a renewal statement at least 21 days before your term ends. This document is your official notice and a cue to start thinking about your next steps. It’s important not to put this aside for later.
What to Expect in Your Renewal Statement
Your renewal statement contains important information about your mortgage and the offer for your next term. You can expect to see details such as:
- The remaining balance on your mortgage
- The new interest rate they offer
- The new term length
- Your payment frequency & amount
- Any fees that may apply
The Consequences If You Don’t Renew
If you ignore your renewal notice, your lender won’t forget about the loan. They have policies in place for this situation, and the outcome is rarely in your favour.
Automatic Renewal into a Closed Term
Many lenders will automatically roll your mortgage into a new term—often a six-month or one-year closed term. The problem is that this renewal is usually at their posted interest rate, which is much higher than what you could negotiate. This can cost you a lot of extra money in interest.
A Rollover to an Open Mortgage
In some cases, your lender might place you into an open mortgage. This gives you the flexibility to pay your mortgage off anytime without a penalty, which is helpful if you plan to sell. However, open mortgages come with very high interest rates, costing you more each month.
A Demand for Full Repayment
In a more serious scenario, your lender could consider your mortgage in default if you don’t renew. They can also demand that you pay the entire remaining balance immediately. This is the riskiest outcome and can lead to legal action if you’re unable to pay.
Common Reasons for a Renewal Delay
People sometimes delay their mortgage renewal for specific reasons. It’s important to have a plan instead of just letting the deadline pass. Communication with your lender or mortgage professional is key.
You Plan to Sell Your Home Soon
If you intend to sell your property and are also thinking about purchasing a new home, locking into a new five-year term doesn’t make sense. An open mortgage or a short-term solution might be a better fit.
You Want to Find a Better Rate
You might want to wait for interest rates to drop before you commit to a new term. While this can sometimes work, it’s a gamble. If rates go up instead, you could miss out on a better offer that was available earlier.
You Hope to Refinance Your Loan
If you’re planning to refinance to access home equity or consolidate debt, the process can take time. It’s best to start this well before your term ends. This helps you avoid getting stuck in an automatic renewal you don’t want.
Your Options at the End of a Mortgage Term
Your mortgage renewal is a valuable opportunity. It’s the perfect time to make sure your mortgage still fits your life and your financial goals. You have several powerful options to consider.
Review Your Finances & Future Needs
Think about your financial goals for the next few years. Do you want to pay your mortgage off faster, or do you need a lower monthly payment? Answering these questions, perhaps with the help of a handy mortgage calculator, can help you choose the right product for your situation.
Negotiate with Your Current Lender
The first offer from your lender is rarely the best one they can provide. Don’t be afraid to negotiate for a better rate. If you have offers from other lenders, you can use them as leverage to get a more competitive deal.
Switch to a New Lender
You are not obligated to stay with your current lender. Shopping around can help you find better rates and terms that save you money over the long run. A new lender might even cover some of the costs of switching in order to win your business.
How Mortgage Brokers in Calgary Can Help
Navigating the renewal process can feel overwhelming, especially if your financial situation has changed. Working with a professional can make everything much simpler. The right team of mortgage brokers can help you understand all of your choices without any pressure.
An independent mortgage professional can support you in several ways:
- They shop dozens of lenders for you to find competitive rates.
- They can find flexible products if you plan to sell your home.
- They offer independent advice tailored to your financial situation.
Take control of your mortgage renewal by being proactive. You can avoid costly automatic renewals and find a mortgage that truly works for you. Whether you decide to stay, switch, or sell, making an informed decision puts you in charge of your financial future.
With Mortgage Connection, you can navigate your renewal with clarity and confidence. Reach out to our team today to explore your options and find the right path forward.
