With a massive wave of mortgage renewals starting, homeowners need to understand the process and their options. This blog will give you a quick rundown on what to expect during a mortgage renewal in Canada.
What is a mortgage renewal?
Your mortgage has a fixed term, typically lasting 6 months to five years (the ‘term’ should not be confused with the ‘mortgage amortization’, which is how long it would take to pay off the mortgage in full if you kept with the payment schedule). When your term ends, you’ll need to renew your mortgage to carry on with the existing bank/lender and to continue paying off the mortgage. This involves negotiating a new interest rate and term with your current lender or shopping around for a better deal with competing banks. During a mortgage renewal, you are renewing only the balance owing on your mortgage, with no request for additional funds or equity (otherwise, it’s deemed a ‘mortgage refinance’ which is different).
Why is 2024 significant?
Again, data suggests a whopping 80% of Canadian mortgages are up for renewal in 2024, translating to $250 billion in outstanding loans. This means many homeowners will be revisiting their mortgage terms this year, whether they have plans to or not.
What do I need to do?
Your lender will send you a renewal offer at least 21 days before your term ends, but often much sooner (30-45 days). This offer will outline the proposed interest rates and term choices. But you’re not stuck with it! Here’s what you can do:
Shop around: Get quotes from other lenders to see if you can snag a better interest rate. The easiest way to do this is to have a mortgage broker do that leg work for you.
Negotiate: Don’t be afraid to negotiate with your current lender or have a mortgage broker negotiate on your behalf. Remind your current bank of your loyalty and see if they can match a competitive offer.
Consider a new term: Think about if the original term length still suits your needs. You might choose to shorten or lengthen it during renewal, depending on market predictions or just overall comfort level.
Tips for getting the best deal:
Start Early: Don’t wait until the last minute. Research rates and speak with a broker at least 2-3 months before your renewal to ensure sufficient time and attention can be given to securing a better rate.
Credit Score Matters: A strong credit score can significantly improve your renewal offer or refinance options. But, building and maintaining credit should be an ongoing strategy, not a last-minute thought.
Negotiate Leverage: Use a quote from other lenders as leverage to negotiate a better rate with your current lender.
Consider a Fixed vs. Variable Rate: Fixed rates offer stability, while variable rates can fluctuate with the market. Choose the option that aligns with your risk tolerance and financial goals. This can be changed at the time of renewal, but not easily changed mid-term (yes, variable rates can often be converted into fixed rates at any time throughout the term, but pricing will be subject to posted rates at the time of converting, which is an unknown now and therefore hard to predict).
Resources for Canadian homeowners:
While many rate comparison websites can be useful when shopping for options, these sites can lag in updates, or sometimes convince clients they qualify for a product that they do not qualify for. A mortgage broker is best suited to help with renewal offers because we analyze and educate ourselves on all bank’s products, daily and weekly.
By understanding the mortgage renewal process and your options, you can secure the best possible terms and save yourself money in the long run. Remember, with careful planning and some negotiation, you can navigate your mortgage renewal smoothly.
Call us today to help with your renewal: (905) 455-5005
