Mortgage renewal process
Jamie David, Sr. Director of Marketing and Mortgages
- Mortgage renewal time is when borrowers can make a number of changes – such as switching to new product, term length, or lender – without paying a penalty.
- Borrowers – with the exception of insured mortgage holders – will be stress tested if switching to a new lender at renewal time.
- Borrowers can start the renewal process up to 120 days ahead of their renewal date.
At the end of your mortgage term, so long as you still owe a balance, you will need to renew your mortgage. With each mortgage renewal comes the opportunity to assess the features and status of your current mortgage and determine whether it’s still the best fit for your financial situation and goals.
WATCH: How much mortgage can I afford?
What can affect my mortgage renewal?
The biggest factor that can affect your mortgage renewal is whether your financial situation has changed for the worse since you originally took out your mortgage. For example, developing a history of missed credit payments, a decline in income or job loss, or a lowered credit score, can all negatively impact your mortgage renewal.
How many Canadian mortgages are up for renewal in 2024?
According to data released by the Bank of Canada, 80% of all the mortgages that were in force as of March 2022 will be up for renewal in 2024. This represents $251 billion in outstanding mortgages.This will increase to include virtually all mortgages by 2026.
Will mortgage rates go down in 2024 in Canada?
It’s possible; the Bank of Canada, which controls the pricing for variable mortgage rates indicated at the end of 2023 that it would likely stop increasing its benchmark overnight lending rate. This is due to an improvement in the rate of inflation over the course of 2022. Analysts now expect the central bank to start cutting its trend-setting interest rate by this spring, with additional cuts to follow throughout 2025. Should this occur, variable mortgage rates will decrease.
Fixed mortgage rates, while not directly influenced by the Bank of Canada, have already seen slight discounts, as a result of lower bond yields; this is due to investors reacting favourably to expectations that the central bank rate hikes are over. If this trend continues, we can expect fixed mortgage rates to be discounted further.
What questions should I ask when renewing a mortgage?
One of the key questions borrowers should ask themselves at renewal time is whether there have been any life events – such as a job loss or recent big-ticket item purchase – that may impact their profile as a borrower. This may impact the type of rate they’ll qualify for at renewal, so it’s important to be prepared.
Mortgage renewal time is also an excellent opportunity to explore other product options, such as extending your amortization, changing from a fixed to a variable-rate term, or taking out a shorter-length term. For example, if you anticipate moving within the year, ensure your new mortgage product has the ability to port, or perhaps explore open term options.
Can you be denied a mortgage renewal in Canada?
While it’s rare to be denied a mortgage renewal from your existing lender, it can happen; if your financial situation has materially declined (due to defaulting on loan payments, job loss, etc.), then your lender may not renew your existing loan.
If this happens to you, there are options; you may need to take out a different type of term, or seek out financing instead from an alternative lender.
Learn more: What happens if your mortgage renewal is denied?
What is a mortgage renewal?
A mortgage renewal is the renegotiation of an existing mortgage, when the original term contract expires – for example, if you have a five-year mortgage term, once that span of time passes, you’ll need to take out a new mortgage term, either from your existing lender, or a new one. This will need to occur until your amortization ends, and your mortgage is completely paid off in full. Mortgage renewal time is an opportunity for borrowers to assess whether the current features of their mortgages work well for them, and make changes if necessary.
Do I have to renew my mortgage?
As long as you have an outstanding mortgage balance, you will need to renew your mortgage when your existing term is up. However, you can choose to switch to a new lender at that time, or change other features, such as your mortgage’s term length, rate, and type, such as fixed or variable.
Should I renew my mortgage for 3 or 5 years?
It depends. Five-year mortgage terms are by far the most common in Canada, and typically have the most competitive rate pricing. A shorter mortgage term, such as a three- or two-year term, can offer greater flexibility, as the borrower can make changes at a sooner date, but will come at a higher rate.
What is the difference between a mortgage renewal and a refinance?
A mortgage renewal simply refers to taking out a new term for your mortgage when your existing is up, either with your current lender, or with a new one. You will not pay any penalty to renew your mortgage, even if you switch to a different lender. It is simply an extension of your original contract, and the terms of your balance remain the same.
Refinancing your mortgage, however, means ending your current mortgage and starting a new one. This can be done with either your existing provider, or with a new one. However, if you refinance your mortgage in the middle of your term, you may need to pay a penalty for breaking your mortgage. Refinancing your mortgage also allows you to change the loan amount, and even pull cash out of the existing equity you’ve built up.
Check out our mortgage refinance calculator to learn more about this option.
Tips for mortgage renewal time
Your current mortgage provider generally wants you to stick with them at renewal time, and will even send you a renewal slip in the mail that you could easily sign and send back – but if you want to ensure you’re getting the most out of your mortgage, we suggest taking this proactive approach with your next mortgage renewal:
1. Start shopping 4 months before your term is up
Mark your current mortgage term’s maturity date on the calendar, then count back 120 days (~4 months) and mark that too; this is the date most lenders will let you start the early mortgage renewal process, meaning you could renew early with your current lender without having to pay a prepayment penalty (for breaking your term early). If you’re not ready to sit down with your mortgage broker or lender on this day, you can at least start researching your options online. By finding out which lenders are offering what, in terms of mortgage rates, prepayment options and other terms and conditions, you’ll be better prepared to negotiate when you are ready to renew.
2. Consider your financial goals
Let’s face it: a lot can happen throughout your current mortgage term. Your financial goals at the beginning of your current mortgage term may no longer match up with your financial situation today. For example, you could have received a substantial raise at work, lost some income, or even retired. You may have had a baby, or need to pay for your child’s university tuition. If there’s any chance you’ll need to move in the next 5 years, that should be factored into your decision. Or, if you think you want to access some equity, you should be mindful of that too. Whatever your needs are, make sure you consider them when choosing a mortgage rate, term and product.
3. Outline your mortgage needs
Along with your other financial goals, you should make a list of what you’re looking for in a mortgage product. To start, ask yourself a few questions:
- Does your monthly budget have room for you to increase your mortgage payment amount? (If so, review the monthly prepayment options in the terms and conditions.) Increasing the size or frequency of your mortgage payments can help pay down your principal faster, potentially saving thousands of dollars in interest over the course of our mortgage.
- Do you think you’ll receive any bonuses or inheritances that you could put towards your mortgage? (If so, you’ll also want to look at the lump sum prepayment options.)
- Do you think you’ll have the option to pay off your mortgage entirely, in this next term? (If so, consider the prepayment penalties that go with fixed vs. variable rate mortgages.)
- Do you think you will want to borrow more money from your lender during this next term? (If so, you’ll again want to consider the prepayment penalties involved in a refinance, or look at collateral mortgages instead.)
- Is there any chance you’ll be selling your home and/or moving in the next 5 years? (If so, you may want a mortgage that is portable or assumable.)
4. Be ready to renew in the last 30 days
By law, your current lender has to send you a mortgage renewal statement at least 21 days before your term is up, but they will usually mail you a renewal offer for their lowest posted rate that is good for the 30 days before maturity. By extending that offer for 30 days, you’re protected from any potential rate increases during that time. However, you should have done enough research by now to know whether or not it’s actually the best mortgage rate on the market – and if not, you’re perfectly within your right to try to negotiate!
Keep in mind, even if you sit down with your current lender to negotiate their offer, it’s unlikely they’ll be able to give you the best mortgage rate. So, in your last 30 days, you should also make an appointment with a mortgage broker to discuss what other lenders can offer you.
5. Make a decision
After shopping around, considering your financial goals, outlining your mortgage needs and receiving a mortgage renewal offer from your current lender, it’s finally time to make a decision. The last question you’ll need to ask yourself is who is offering you the best mortgage rate and product: your current lender or another lender? If you decide to stay with your current lender, you can either choose to sign and return the mortgage renewal offer they sent in the mail, or sit down and try to negotiate a better offer in their offices.
Switching providers will require a little more paperwork, but you’ll find that doing so will give you access to better mortgage rates. Just be prepared to submit a mortgage application, as the new lender’s qualifying criteria might be different from that of your current lenders. There may also be fees involved with making the switch, including an appraisal fee to verify your property’s value ($150-$500), a discharge fee ($5-$395), an assignment fee ($25-$300) and legal fees (up to $1,500). Certain mortgage brokers and lenders will offer to pay for some or all of these fees when you bring your mortgage to them but others won’t, so you should be prepared to pay for them with cash.
Borrowers considering switching to a new lender at renewal should also keep in mind that they’ll need to pass the mortgage stress test, which requires them to qualify at a rate of either 5.25% or their contract rate, whichever is higher. As this may impact your overall affordability and how much mortgage the lender is willing to finance, it’s an important consideration.