What Is A Mortgage Renewal?

Mortgage repayments are amortized over a set time, usually 25 – 30 years initially. You then decide on a lender, a term between 1 to 10 years, (5 year is the most popular) and a rate option. (Fixed or variable).

A mortgage renewal simply means your term is nearing an end and it’s time to renew your mortgage, either with your current lender or with a new lender.

Many Canadians invest a lot of time and effort into shopping for their initial mortgage but few actually do the same at renewal time.  Your current lender will contact you about 6 months before your renewal with their renewal offer.  They will tell you how easy it is to renew, simply sign here and presto, your mortgage will continue with them.  You should never blindly re-sign without exploring your options.

What Are Your Options At Renewal?

  1. Sign the renewal offer from your current lender (The rates offered are usually not the best rates)
  2. Try to renegotiate with your current lender yourself for a better rate
  3. Talk to your Dominion Lending Centres Mortgage Broker and together discuss your options and decide what works best for your situation.

Lenders know a very high percentage of borrowers will take the path of least resistance, blindly re-sign without exploring their options.  For this reason, the rates offered on renewal are often not the best available rates. Remember, banks and financial institutions are businesses and they want to maximize their profits.

Yes, signing the renewal offer is easy, however, it’s in your best interest to take a more proactive approach.  Assuming you take the popular 5-year term, spending a few hours every 5 years to find the best offer can save you thousands of dollars in unnecessary interest costs.

5 Tips For A Smooth Mortgage Renewal

1. Receive the renewal offer from your current lender and examine their offer.  Typically, this is 6 months before your maturity date.  Don’t put this off.

2. Call your Mortgage Broker and send them a copy of your renewal offer.  Remember, most want to take the path of least resistance so save yourself some time and have your Broker shop the market on your behalf.

3. If there are better options in the marketplace, call your current lender and negotiate.  They want your business and letting you walk out the door to a competitor is bad business.

4. If they won’t compete on rate and terms, it’s time to change lenders.  Full disclosure, you will be required to complete a new mortgage application and submit a full document package.  I can hear the groaning already, what a hassle!  I don’t know about you but I’d rather spend a couple hours doing this if it’s going to save me thousands in interest expenses.

5. Consider increasing your payments in order to accelerate your mortgage repayment. Depending on the size of your mortgage, increasing your payments can literally save you tens of thousands of dollars in interest expenses.

Your mortgage is most likely the largest expense in your lifetime.  I say you need to be proactive throughout the whole life of your mortgage and not just at your initial purchase.  Working with your Mortgage Broker and being proactive will ensure you get the best deal.

If you found this post helpful, please share with someone you think can benefit from this info.  If you have any questions about your mortgage renewal or general mortgage questions, please contact me anytime.