Mortgage renewal tips

*Based on a $700,000 home price, 10% down payment, amortized over 25 years, and a five-year fixed mortgage rate of 4.64% vs. 4.39%.

With the national average home price now at $709,2189¹, it’s likely that your mortgage payment is already the largest expense in your monthly budget. However, when your mortgage term is up and it’s time to renew, lenders make it all too easy for you to pay a higher interest rate than you need to. Before you sign the first mortgage renewal offer that’s sent to you in the mail, check out the helpful video below with advice on how to renew your mortgage in 2024. Then, read our tips to help you get the best mortgage rate and product during your mortgage renewal process.

1. Start shopping early

First and foremost, the most important step you can take in the mortgage renewal process is to start shopping around for a new mortgage rate and product early. If you’re staying with your current lender, most will let you renew early – within the final 120 days of your mortgage term – without penalty. However, it’s unlikely your current lender will be able to offer you the best mortgage rate on the market. For this reason, it’s important that you take the time to shop around online and/or consult a mortgage broker, before your term is up.

2. You can ask for a better rate

Your current lender will start sending you renewal offers in the last 30 days of your mortgage term, if not sooner. On average, mortgage lenders offer existing clients a discount of 0.75% off their posted rate – and they include a letter that you can simply sign and send back, to agree to that rate. This mortgage renewal process is attractive because of how convenient it is at the time, but it will result in you paying a much higher interest rate than you need to. You can make an appointment with your lender to try to negotiate a better rate, but it’s unlikely they’ll be able to offer you the same low rate that a new lender could, if you switched providers. Whether you stay with your current lender or switch, just know that you don’t have to accept the mortgage rate they first offer you – you can ask for something better.

3. The best lender before won’t be the best lender today

Think about it this way: Your financial goals from when you took on your current mortgage term are likely different from what they are today, right? You could be at a completely different stage in your life now. Well, the same can be said for your lender. It’s convenient to stay with your current lender, of course, but convenience comes at a price – in the case of mortgage renewals, it may come with a higher interest rate, and terms and conditions that may no longer suit your needs. Consider all of your mortgage needs – rate, prepayment options, etc. – and go with the lender who can offer everything you’re looking for. In today's mortgage environment, rates are historically high, but experts are predicting that the Bank of Canada will carry out rate cuts towards the end of 2024 and into 2025. Think about ways that you can potentially take advantage of lower rates to come, and whether your current lender is the best choice. Have a look at the short video below on this topic, then read on for more tips. 

4. Get a rate hold

Once you’ve shopped around, and found a mortgage rate and product you’re happy with, ask for a rate hold. Most lenders will let you hold a rate for 90-120 days – meaning that they’ll promise you can have that same rate, even if mortgage rates go up, as long as you come back within 90-120 days to get it. If, during the time of your rate hold, mortgage rates go down, you can still negotiate to get the lowest rate. A rate hold simply gives you some security, if you’re worried that rates will go up before you’re ready to renew.

5. Switching providers takes time

If you decide to switch providers during your mortgage renewal process, you’ll want to get your mortgage broker or new lender to start that process early. Because the criteria your current lender used to qualify you for a mortgage may be different than the criteria your new lender uses, you will need to submit a mortgage application. Along with your application, you’ll need to provide a copy of your mortgage renewal letter, proof of income, proof you own the home and proof that you have property insurance. A week isn’t even enough time for most brokers to make the switch, so get the process started early or you could end up being stuck with your current lender for another term.

6. Most providers will do the switch for free

Switching providers can come with a couple of fees – namely a new appraisal fee ($150-500), as well as the costs associated with discharging your mortgage ($5-395) from your current lender. The good news is there are mortgage brokers and providers out there who will offer to do the switch for free, and cover all of your costs in order to get your business. It may take a little negotiating, but make sure you at least ask if your new lender will cover these costs, before you simply agree to pay them yourself.

Words of advice: Once your mortgage is below $100,000, it will be difficult to find a broker or lender who will cover these costs, because their small commission will be wiped out by the fees. When you get to this dollar point, try to bargain aggressively with your current lender for their best mortgage rate and product.

7. The best time to refinance is when you renew

Finally, if you’ve been thinking about refinancing your mortgage to access some equity, the best time to do so is when you renew your mortgage. A typical refinance involves breaking your mortgage term, resulting in what can be a hefty prepayment penalty. By refinancing during your mortgage renewal process, you’re not breaking your mortgage term and, therefore, you won’t be subject to a prepayment penalty.

References and Notes

1. http://www.crea.ca/housing-market-stats/national-average-price-map/