When a lender grants a mortgage for a home to a borrower (the “mortgagee”), a formal contract is signed, setting out the terms and conditions of the mortgage. The length of such a contract will be for a fixed period of time. This is called the “mortgage term” (or the “term”). The term can range from a few months to five or ten years or longer.
If you are wondering: “do I have to renew my mortgage?”, the answer is typically “yes” — unless the outstanding balance is paid off in full. However, you do not necessarily have to renew with your current mortgage provider.
How does mortgage renewal work in Canada? If you’ve been wondering, we’ve provided 5 great tips for renewing your mortgage. Keep reading to learn more.
Assess Your Financial Goals
It’s very likely that your financial goals have changed since you first signed a contract at the beginning of your current mortgage term.
This may be due to a promotion or a salary increase at work, or it may have to do with your personal life. You may have retired, received an inheritance or now have a partner to share the mortgage expenses with. Conversely your financial position may have become more difficult due to a job loss or an increase in expenses due to fees for education or the like.
Whatever the changes, it’s important to try and look ahead for the next 5 or 10 years to see what your finances might be like then. So, when the end of the term of your mortgage is on the horizon:
Outline Your Mortgage Needs
Some factors that typically arise when looking at mortgage needs include:
- What new types of mortgage products are now available vs. which were being offered say, 5 years ago
- If a fixed or variable mortgage interest rate is better
- If it is worth trying to take a larger or longer mortgage in order to release some of the equity in your home
- if you are likely to receive any job-related bonuses or inheritances that you can put towards paying off all or part of your mortgage before the term expires
- If you are likely to be selling your home and/or moving within the next 5 years
Ask For a Better Rate
Mortgage interest rates go up and down, usually depending upon the levels of national bank interest rates. It may be that current rates are far more favourable than at the outset of your current mortgage term.
There are certain advantages of staying with your existing mortgage provider, so it’s well worth letting them know that you are now thinking about a renewal. Simply ask them for a better interest rate — especially if you know that a competitor will make you a more attractive offer!
Ask For a Rate Hold
In some cases, it’s possible to ask your mortgage provider to hold the proposed mortgage interest rate for a renewal whilst the mortgage renewal is being processed. Alternatively, you can look around for a better deal. This “rate hold” is usually for 120 days, but 90 and 60-day rate holds are also common. A rate hold only really applies to fixed rates, since variable rates fluctuate by nature.
Start Early: Allocate Enough Time to Switch Lenders
It’s important to allow enough time to speak with your current lender and shop around for an alternative mortgage. How soon can you renew a mortgage really depends on the lender, but four months before the due date is approximately the time most lenders will agree to start the mortgage renewal process,
However, by law, your current lender has to send you a mortgage renewal statement at least 21 days before your term ends.
Decide What’s Best For You
When considering whether to renew your mortgage with your existing lender or change to another provider, it’s important to consider some of the factors we’ve mentioned above.
Clearly, it’s well worth speaking with a professional mortgage adviser, as well as talking to your mortgage provider about the mortgage renewal process, terms and conditions.
At Axiom Mortgage Solutions, we are experienced with helping clients renew their existing mortgages or find new providers. Why not get in touch with us today for an initial chat?
We’re more than happy to help!