Not all mortgages are created equal. Many of the intricate details are hidden in the terms of your contract, which can make life for mortgage holders confusing and stressful.
But it doesn’t have to be that way. At Mortgage Connection, our entire story is built on providing clarity. This guide provides a clear checklist to help you navigate the mortgage renewal process with confidence and clarity.
What Is a Mortgage Renewal?
At the end of your mortgage term—commonly about five years—you have a choice. You can pay off the remaining balance or renew your mortgage for another term. This process is your chance to get a better deal.
Your Renewal Statement Explained
Your lender will send you a renewal statement before your term ends. It typically includes key details you should review, such as:
- Your remaining principal balance
- The new interest rate offer
- Your payment frequency options
- The length of the new term
- Any applicable fees or charges
Key Terms to Know
Here are a few terms that can help you understand your mortgage documents. These are important for making informed choices about your renewal.
- Term: The length of your current mortgage contract.
- Amortization: The total time it will take to pay off your mortgage. You can see how different scenarios affect your payments with our mortgage calculator tool.
- Principal: The amount of money you still owe on the loan.
- Maturity Date: The last day of your current mortgage term.
Prepare for Your Mortgage Renewal
Your lender must send a renewal statement at least 21 days before your term ends. You should start your preparations a few months ahead of that date. A proactive approach gives you more options and control.
When to Start the Renewal Process
Start to review your options and shop around three to four months before your renewal date This gives you plenty of time to explore different lenders. You can also work with one of the experienced mortgage brokers in Calgary without feeling rushed.
What Documents Are Needed for Mortgage Renewal?
Getting your documents ready ahead of time can make the process smoother, much like it does during the mortgage pre-approval process. You’ll likely need:
- Your mortgage renewal statement from your current lender
- Proof of income—like recent pay stubs or a letter of employment
- Property tax statements
- Proof of home insurance
Review Your Mortgage Needs & Options
Your life may look different now than it did when you first got your mortgage. A renewal is the perfect time to make sure your mortgage still fits your financial situation. It’s also a chance to align your mortgage with your future goals.
Assess Your Financial Goals
Think about what you want to achieve financially. Consider these questions:
- Can your budget handle larger payments to pay off the mortgage sooner?
- Do you want to change your payment frequency—from monthly to bi-weekly?
- Do you plan to make extra lump-sum payments?
- Do you have higher-interest debts you could consolidate? Sometimes, refinancing your home during renewal can help manage other debts.
Choose Between a Fixed or Variable Rate
A fixed rate offers stability with a payment that stays the same for the entire term. A variable rate often starts lower but can change based on the market. This could be a benefit or a risk depending on economic trends.
Adjust Your Amortization Period
You can shorten your amortization to pay off your home faster and save on total interest. Or, you could extend it to lower your payments for better cash flow. Just remember that extending it means paying more interest over time.
Shop Around & Negotiate Your Rate
You don’t have to accept the first offer from your current lender. Their initial renewal rate often isn’t their best one. You have the power to negotiate for a better deal.
Compare Offers from Different Lenders
Contact other banks, credit unions, and mortgage brokers in Calgary. A broker can be a great resource because they work for you. Our experts can help you find a residential mortgage broker who will compare multiple lenders to find a competitive rate that suits your needs.
How to Negotiate with Your Current Lender
Once you have offers from other lenders, present them to your current one. They may be willing to match or beat a competitor’s offer to keep your business. Don’t be afraid to ask for a better rate or more favourable terms.
The Cost of Automatic Renewal
If you don’t take any action, your mortgage may renew automatically into a new term. This convenience often comes at a cost. You could end up with a higher interest rate than you could get by actively shopping around.
Potential Renewal Challenges & Lender Switches
Sometimes a new lender offers a deal your current one can’t match. Before you make the switch, it’s important to understand the process and potential costs. It’s also good to know what could cause a renewal to be denied.
Potential Costs to Change Lenders
Switching lenders isn’t always free. Be aware of possible costs, which can include:
- Discharge or transfer fees from your current lender
- Setup or administration fees with the new lender
- An appraisal fee to confirm your property’s value
- Legal fees to register the new mortgage
What About a Collateral Charge?
If your mortgage is registered as a collateral charge, switching lenders can be more complex. You may need to pay additional legal fees. These cover the costs to discharge the old mortgage and register the new one.
Common Reasons for a Renewal Denial
While it’s not common, a mortgage renewal can be declined. This usually happens if your financial situation has changed significantly. Reasons can include a drop in your credit score, an increase in debt, job loss, or missed mortgage payments. Navigating these potential issues is easier when you have an expert on your side; you can meet our team of mortgage experts who are ready to help.
A mortgage renewal is one of the best times to improve your financial future. By preparing early and exploring all your options, you can secure a mortgage that truly works for you.
Our team at Mortgage Connection is passionate about helping you navigate this process with transparency and clarity. Contact us today to discuss your renewal and make a fully-informed decision.
