Canadian mortgage renewal tips & tricks

As your mortgage term approaches its end and the renewal period draws near, it’s essential to consider any changes in your personal and financial circumstances, especially from when you initially started your mortgage. This way, you can make the most of your renewal and ensure it aligns with your future needs. Mortgage terms in Canada typically have a relatively short duration. On average, most Canadian mortgages last for approximately five years, although various lengths are available.

Mortgage renewal essentially involves extending your current mortgage contract with the same lender, without any changes to your mortgage balance.

With that said, a lot can happen in the span of 5 (or however many) years during your mortgage term, and there’s lots to consider when that renewal date is around the corner. In this article, you can find our professional tips and tricks on what to consider when it’s time to renew, and how to best position yourself for the next term.

What is a Mortgage Renewal?

Mortgage renewal refers to the process of renewing your mortgage contract when your current term comes to an end. Whether it’s your first home or an additional property, you will be presented with a new mortgage agreement. Renewal contracts can sometimes include special offers, but they can also involve changes such as differences in interest rates, payment adjustments, and other modifications that your bank or lender has implemented since you signed your previous mortgage contract. Regardless of the offers presented, renewing your mortgage provides an opportunity to negotiate certain aspects, such as the duration of your next term and your ability to pre-pay or reduce your outstanding balance.

The only time you won’t need to renew your mortgage is when you are about to fully repay it. In that case, you simply make the final payment and let the term end. It’s common for Canadians to go through multiple mortgage terms before fully paying off their properties, so don’t stress if you’re not quite at the finish line just yet!

The Process of Renewing Your Mortgage

Typically, about three months before your term expires, your lender will notify you about the renewal, especially in cases where they don’t automatically renew it. You will oftentimes receive a renewal statement containing information such as the remaining balance on your mortgage, payment frequency, interest rates, and any applicable fees or charges. This statement outlines what they are offering for the next mortgage term.

Unlike other mortgage-related processes, renewing your mortgage is usually not as lengthy. Most of the time, you can simply log into your bank account and renew from there. It’s advisable to check your account a few months before the actual renewal to allow time for reviewing your finances and deciding whether you want to negotiate or make any changes.

Must-Knows & Tips for Mortgage Renewal

When the time comes to renew your mortgage, it’s advantageous to assess your mortgage needs. Take the opportunity to explore the best mortgage rates, payment frequencies, and services offered by multiple lenders based on your specific financial situation. You may even consider switching lenders during the renewal if it benefits you.

Timing is Crucial for Renewal: Since mortgage terms are typically five years long, the end of that period is the best time to renew. If you have a longer mortgage and wish to renew early, carefully consider the timing and reasons, as renewing too early may lead to consequences or financial penalties. If renewing your mortgage early will ultimately save you money, it’s worth taking advantage of.

Payment Frequency Should Align with your Financial Means: Whether you prefer more frequent or longer interval payments, ensure that the payment frequency you choose remains manageable for your budget. There are various payment methods available, but you can also opt to stick with the same approach you used before.

Remember that Interest Rates are Negotiable: If you have consistently met your financial responsibilities and have experienced positive changes in your financial situation, you may qualify for a better interest rate. Depending on your situation and projected timeline for paying off the mortgage, you may want to consider negotiating between a variable rate and a fixed rate.

In some cases, Canadians may be denied a mortgage renewal by their current lender due to significant changes in credit score or income. Switching lenders provides an opportunity to find a more suitable agreement, and alternative lenders can be a viable option as they often consider factors other than credit history when granting loans.

Do Mortgage Payments Decrease When You Renew?

The amount you pay toward your mortgage can change depending on what your lender offers or what you negotiate. If you have consistently made timely mortgage payments, you may be offered a lower interest rate during the renewal. If the current interest rate offered is lower than what you paid in the previous contract, your payment may decrease. Conversely, if interest rates increase, your payment may rise. However, if your amortization remains the same, it’s unlikely that your payment will undergo significant changes.

After Renewing Your Mortgage

As you continue making regular mortgage payments, you build equity in your property. Equity represents the difference between your outstanding mortgage balance and the market value of your house. The more you pay off your mortgage, the higher your equity. Homeowners can access this equity as a loan for purposes such as home renovations, starting a business, or acquiring additional property.

When you have accumulated substantial equity, alternative lenders like Alpine Credits can help you access it through a home equity loan. Your income, credit history, or credit score do not significantly impact your chances of approval. You can contact one of our Financial Solutions Specialists to explore the opportunities available with home equity.

For more information on how you can prepare yourself for your mortgage renewal, be sure to check out our other articles & message us! We have a team full of experts who have 10+ years of knowledge in this field, don’t hesitate to get in touch.

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