Mortgage Renewal Calculator Canada
Is refinancing your mortgage worth it?
Do you need to change the terms of your mortgage or take cash out of your home? Use our refinance calculator to determine if the penalty is worth it.
How do you get the best mortgage renewal rate?
If there’s one way to ensure you’ll get the best mortgage renewal rate, it’s being aware of your options; understanding what rates are available in the mortgage marketplace – and whether your lender is being competitive with their pricing – can give you the ability to negotiate for a better mortgage rate at renewal time, or make the switch to another lender. Comparing the best mortgage rates in Canada is a great way to be insightful about current mortgage rate pricing.
Do you have to re-qualify when you renew your mortgage?
As long as you have been making your monthly payments regularly and are otherwise in good standing with your lender, if you choose to stay with the same lender at renewal, you typically do not have to re-qualify for your mortgage, or re-pass the mortgage stress test, at renewal time.
However, if you choose to switch lenders to get a better rate and/or a mortgage product that is more suitable for your needs, you will have to submit a new application, be stress tested, and qualify in order to start a mortgage term with a new lender. The only exception is insured (high ratio) mortgage borrowers; as announced by the Office of the Superintendent of Financial Institutions (OSFI) in October 2023, transactionally-insured borrowers to not need to be stress tested if switching to a new lender upon renewal, as long as the original mortgage amount and amortization period do not change.
How hard is it to re-qualify at renewal?
If you choose to remain with the same lender, are in good standing with them and your financial situation hasn’t materially changed, you usually don’t need to re-qualify. You simply need to fill out the necessary paperwork and submit it in a timely manner.
However, if you choose to switch to a new lender because you’ve found a better rate, for example, then you would be subject to the new lender’s standards for qualifying for a mortgage. In this case, you are essentially going through the same process as when you first applied for a mortgage, and factors such as your credit score and history, your employment status and your debt-to-income ratio will affect your ability to qualify. You will also need to pass the mortgage stress test, proving you can afford your mortgage payments at a rate of 5.25% or your contract rate plus 2%, whichever is higher. As mentioned above, insured mortgage borrowers are exempt from the stress test when switching lenders at renewal time.
How many months before can you renew your mortgage?
Most lenders allow you to renew your mortgage without any penalties up to 120 days (or four months) before your term is up.
Is it worth renewing your mortgage early?
Renewing your mortgage early can come in handy if you think mortgage rates will rise in the future, and want to take advantage of the current rates available.
However, it’s important to remember that you can only do this and avoid penalties if you are sticking with your current lender. If you wish to switch lenders before the end of your term, you will be subject to penalties as laid out in your mortgage contract.
Do mortgage payments decrease when you renew?
It depends; if you’ve paid down a significant portion of your mortgage and have an overall smaller principal loan amount, then your regular payment amount will also decrease upon renewal, should all other factors, such as your mortgage rate, stay the same. If you renew your mortgage at a higher mortgage rate, however, that may offset having a smaller principal balance, and your mortgage payment could increase. By contrast, if you renew at a lower mortgage rate, your payment could decrease as you’re paying less in interest each month. Other factors, such as extending your amortization period at renewal time, can also impact the size of your mortgage payment.
Jamie David, Sr. Director of Marketing and Mortgages
Why use a mortgage renewal calculator?
Your mortgage payment is almost certainly the largest expense in your monthly budget. As such, when it comes time to renew, you want to be sure that you are getting the best rate and mortgage product available. Read on to learn more about how to use our mortgage renewal calculator, how the mortgage renewal process works and for tips on how to achieve the best outcome when it’s time to renew.
How to use our mortgage renewal calculator
Ratehub.ca’s mortgage renewal calculator makes it easy for you to figure out your projected monthly mortgage payments and generate amortization schedules for multiple scenarios. To get started, you’ll need to enter the following information:
- Mortgage amount: Enter the total amount of your mortgage loan (without deducting any equity you may have accrued over time).
- Location: Enter the location of your home.
- Original down payment: Select whether your down payment was more or less than 20%.
- Amortization: You can choose up to three different amortization lengths to generate multiple amortization schedules.
- Payment frequency: You can select up to three different payment frequency scenarios, which allows you to generate multiple amortization schedules.
How to read your results
After entering the above information, you can choose your desired amortization scenario. The calculator will then generate the amortization schedule; you’ll see a dark blue line going from the top left-hand corner to the bottom right-hand corner, which represents the balance remaining on your mortgage loan. It starts off at what the amount of your balance is today, and finishes when the amount is $0.
You’ll also see a green portion, which represents how much of your payments are going towards the principal mortgage amount. Over the course of the amortization period, the green portion will grow as the percentage of your payments that are going towards paying off the principal increases and the percentage you are paying towards the interest reduces. The last payment in your amortization schedule leaves you with a balance of $0, meaning that you have paid off your mortgage.
In addition to the amortization schedule, the calculator will also display a table that illustrates the totals paid towards principal and interest as well as the total balance at the end of your mortgage term. This will be clearly differentiated from the remaining amortization table, which illustrates your monthly payments towards principal and interest based on the scenario you have entered into the mortgage renewal calculator.
How to renew your mortgage
The simplest way to renew your mortgage is to sign the renewal form sent to you by your current lender in the last 30 days before the end of your mortgage term. However, this convenience can come at a cost – since the renewal rate your lender will offer you is likely not the best rate you can qualify for. With that in mind, here are some tips for finding your best mortgage renewal rate, which can save you thousands of dollars over time.
- Get started as soon as you can: While your current mortgage lender will most likely send you a renewal document during the last 30 days of your term, starting the renewal process earlier will allow you time to think about what you want and negotiate a better deal. You should really aim to start the renewal process 120 days out from your renewal date. If your current lender won’t negotiate with you, you’ll still have time to contact a mortgage broker and shop around for a new lender and a mortgage that better suits your needs. Don’t forget that if you do decide to switch lenders, you’ll need to give yourself time to gather the necessary documentation and give your broker time to process your application.
- Carefully consider your financial and life goals: Your financial and life goals may have changed since you first took out your mortgage. For example, your job situation may have changed, you may have decided to have kids, or a child of yours may be nearing university age and you want to be able to afford tuition. Considering your goals and life events on the horizon helps you find the right mortgage product with the features that you need. For example, if you think you will have to move before your mortgage term is up, you’ll want to make sure you’ll be able to port your mortgage. As well, if you anticipate receiving a sum of money, such as inheritance, in the future and intend to pay off your mortgage, exploring open mortgage options may be a good idea at renewal time.
- Make a list of your mortgage needs: When considering your financial and life goals, make a list of the features that the right mortgage should have. These features can include portability or the ability to make lump sum pre-payments without incurring penalties.
- Renew your mortgage: After you’ve carefully considered your financial goals and shopped around, you’ll want to renew your mortgage within the last 30 days of your term, whether it’s with your current lender or a new one. Bear in mind that, should you choose to switch lenders, you’ll want to have gathered all the necessary documentation to submit a new mortgage application (e.g. copy of renewal letter, proof of income, proof you own the property and proof of property insurance). If you are switching lenders, you’ll want to do this as early as possible, as it’s best to give several weeks for your application to be processed. Otherwise, you could end up being stuck with renewing with your current lender with a rate or terms that are less preferable.
Tips for renewing your mortgage
There are a number of steps that you can take to help ensure that when you renew your mortgage, you are getting the most favourable rate and terms possible. Here are some of the most important to keep in mind:
- Don’t be afraid to ask for a better rate: Your current mortgage lender will likely make it very easy for you to renew, and may be banking on the fact that you’ll just sign your agreement letter without considering your options for the sake of convenience. Rarely is the renewal rate that your current lender offers you the best rate available, and in Canada’s highly competitive mortgage market, there are typically lower rates available from other lenders. In today’s rising rate environment, negotiating for the best rate possible is more important than ever.
- Use a mortgage broker: Save yourself the time and effort of going from lender to lender to try to get the best rate. A mortgage broker can serve as your one-stop shop, and is able to provide you with information on numerous lenders, as well as expert, personalized advice at no cost to help you make the right decision. A mortgage broker can also help you obtain a rate hold, which allows you to lock in a mortgage rate for up to 120 days, giving you time to continue your search with the peace of mind that you’ve secured a good rate. If a lower rate is available at the time you’re ready to sign, you will be offered that lower rate.
- Give yourself as much time as possible: Don’t wait until the last 30 days of your mortgage term to get started on the renewal process. Start as soon as you can, 120 days before your term is up. Make sure you’ve allotted adequate time to discuss your renewal with your current lender, as well as leaving time to consult with a mortgage broker as well. In the event that you decide to switch lenders, this will entail a whole new application that has to be processed for you to be qualified, which necessarily takes time.
Renewing vs. refinancing
A mortgage renewal is quite straightforward, and just what it sounds like – if you have not paid off the balance of your mortgage before the end of your mortgage term, you will need to renew it. As mentioned above, you can do this by simply signing the renewal form sent to you by your current lender in the last 30 days of your mortgage term, or you can shop around and either renew with your current lender or a new one at conditions that are better suited to your needs.
Refinancing, on the other hand, is quite different. If you refinance your mortgage, you are actually breaking your current mortgage contract. Reasons to refinance may include the desire to obtain a better mortgage rate, to access the equity in your home or to consolidate debt, for example. While you can choose to refinance your mortgage at any time, be aware that there are often significant penalties for doing so. It is often a good idea to wait till the end of your mortgage term to consider refinancing in order to reduce the size of the penalties you may incur, but note that renewing your mortgage and refinancing your mortgage are two entirely separate things.