Mortgage Renewal Time? Some Tips Below

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1. Consider your current financial goals

Before you sign your mortgage renewal slip and send it back, you should first review your financial goals. You want to be sure your current provider can offer a mortgage product that suits your needs. For example, if your current mortgage term is a 5-year fixed rate, the renewal slip will likely be for another 5-year fixed. If you think you’ll stay in your home for that amount of time, great. But if you know there’s a chance you’ll downsize or potentially move to a new city in the next few years, you may want to look for a 3-year product instead.

Other financial goals to consider may be how extra money (like an inheritance) could affect the pre-payment options you want. As well, consider whether it makes sense to refinance your mortgage or get a HELOC to access equity. You may also want to think about refinancing if you need to extend your amortization period in order to reduce your monthly mortgage payments – you can use our amortization calculator to see what your monthly payments would be in different amortization length scenarios. Knowing what you need in a mortgage should help you form the decision around which lender and product to choose.

2. Start to shop around early

Just how soon can you renew a mortgage? Sure, you may be a few months away from your mortgage maturity date, but they say the early bird gets the worm! This phrase rings especially true with the mortgage renewal process.

While your current lender will likely send you that renewal slip some time in the last 30 days of your mortgage term, you can usually start negotiating as early as 120 days before your maturity date. To ensure you’re ready, find the maturity date on your mortgage contract (it may also be visible through online banking) and count 120 days back on a calendar.

If you can’t negotiate a better offer with your current lender, this gives you time to start considering switching providers. You may not be able to switch your mortgage over until your actual renewal date arrives, but this gives a mortgage broker time to give you mortgage renewal advice and find the best product. It also allows time to get the paperwork ready so you’re not left scrambling at the last minute.

3. Ask for a better mortgage rate

With those little mortgage renewal slips, lenders make it too easy for you to answer the should I renew my mortgage now? question by providing a quick and easy way to renew. They know you’re busy and that you’ll pay for this convenience. On average, mortgage providers only offer their existing customers a discount off their posted rate on a renewal slip. But this isn’t the lowest possible rate, even from your current lender. On top of that, there are usually lower rates available from other lenders.

Negotiating mortgage renewal for a better rate becomes even more important in a rising rate environment, such as the one we are in today. Here’s a chart outlining how much you could save by asking for a better rate on a $500,000 mortgage with a 25-year amortization.

4. Get a rate hold

When you shop around for a better rate, a good strategy is to use a mortgage broker. Rather than having to go from lender to lender, a mortgage broker can pull your credit report once and find a list of lenders who will work with you along with the best rates they can offer. Your mortgage broker can easily tell you what rate you could qualify for if you choose to switch lenders.

This process can happen very quickly, often at the first appointment. If you aren’t ready to make a decision, for example, if you want a chance to let your current lender match that rate, ask your mortgage broker for a rate hold. Rate holds protect you from interest rate increases for up to 120 days. If interest rates go down during that time, don’t worry, you can negotiate down to that new lower rate, too. Rate holds lock in the rate if you’re worried rates will rise before you’re up for renewal.

5. Give yourself time to switch lenders

If you decide to switch lenders, you may be wondering – when should I start looking to remortgage? The answer is as early as possible. You’ll need to submit a mortgage application as though you are applying for a new mortgage, which means you’ll need to provide documentation including:

Copy of your mortgage renewal letter
Proof of income
Proof you own your home
Proof of property insurance

It usually takes a mortgage broker over a week to process your application, so make sure to leave plenty of wiggle room between when you start the process and when your mortgage is due to renew, otherwise you may end up being stuck with your current lender at a less than optimal rate for your next mortgage term.