Mortgage renewal process
When your mortgage contract ends while you still owe money, you will need to renew your mortgage for another term. With each mortgage renewal, it’s an opportunity to assess your financing options, considering your new financial goals. Your lender will send you a renewal agreement in the mail that you can sign and return. To ensure that you have all your needs met, we suggest that you follow this proactive approach when renewing your mortgage:
1. Start shopping four months before the end of your term
Remember the due date of your mortgage term, then go back 120 days – even if it means circling the maturity date in your calendar. This is when most lenders allow you to renew early without penalty. If you’re not ready to continue your term yet or discuss it with your banker, why don’t you take the time to research online and compare the rates, contracts, and options available on the market? So when the time comes to negotiate the terms of your new mortgage contract, you’ll be ready to haggle.
2. Assess your financial goals
It must be said that many things can change during a mortgage term, and what you wanted at the beginning may very well change now. Did you take advantage of a pay raise, welcome a baby, etc.? Perhaps you are even starting your retirement or currently have to pay the university fees of one of your children? Finally, whatever your reasons, consider them carefully before signing anything. For example, evaluate the mortgage rate, but take the time to assess the applicable term and conditions. On another note, if you hope to refinance, you have to plan to avoid missing the boat because the procedures can sometimes be lengthy.
3. Assess your mortgage financing needs
Depending on your other financial goals, you should list what you are looking for in a mortgage. To get started, ask yourself these few questions:
- Does your monthly budget allow you to increase the number of your mortgage payments? (If so, review the prepayment options found in the terms and conditions of the mortgage agreement.)
- Do you think you will receive a bonus or an inheritance that you would like to invest to reduce your mortgage? (If so, you’ll also need to look at prepayment options.)
- Do you think you can pay off your mortgage in full in the next term? (If so, consider the prepayment penalties of a fixed-rate or floating-rate contract.)
- Do you plan to refinance your mortgage in the next term? (If so, consider the prepayment penalties that refinancing entails, or consider mortgage guarantees.)
- Do you plan to sell your house and move in the next five years? (If so, you may want a mortgage transferable to another person and another property.)
4. Be ready to renew within the last 30 days
By law, your lender must send you a renewal contract at least 21 days before the expiry of your current agreement. Usually, they do this by sending you their lowest applicable rate within 30 days. This allows you to protect yourself from rate variations during this period and benefit from a competitive rate. It would help if you had already done the necessary research to find the best rate available on the market. Know that you are entitled to negotiate during the renewal. If your lender does not offer you the best available rate, make an appointment with a mortgage broker to discuss the various possible options within 30 days.
5. Make a decision
After reviewing the options, considering your financial goals, and basing yourself on your mortgage needs and the offer received, it will be time for you to decide. Who is giving you the best deal? If you choose to stay with your lender, sign, and mail back the renewal offer. Otherwise, you can sit down with him and try to negotiate a better deal.
If you decide to switch lenders, you’ll need to do a little more paperwork, but it’s worth it if you think you’ll have access to better mortgage rates and terms. Since each lender has its eligibility criteria, you will need to reapply for a loan. There may be associated fees for making the change of financial institution, as well as for property appraisal (between $150 and $500), breach of contract fees (between $5 and $395), land transfer tax fees (between $25 and $300) and legal fees (up to $1,500). When you do business, some mortgage brokers and lenders offer to pay some or all of the costs and sign with them.