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Mortgage Renewal

Mortgage agreements can have a term that does not fully cover the repayment of the loaned amount. A mortgage renewal is a financial agreement with a mortgage lender where you secure a new term for your loan that is approaching maturity. This new term will cover the next portion of your remaining loan and may in turn require a renewal when it matures. If you have a mortgage that won’t be fully paid off at the end of the term, you will need to get a mortgage renewal.

Your mortgage renewal is an opportunity for you to shop around with different lenders and negotiate the best deal for yourself. By planning ahead you can secure yourself a better rate and a more suitable loan structure. For all your mortgage renewal needs be sure to consult trusted and experienced mortgage professionals.

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    What is a Mortgage Renewal?

    If there is an outstanding or remaining portion of your mortgage loan when the term ends by reaching maturity you need to secure a mortgage renewal to cover the loan. The renewed mortgage will then cover a new term and may have a different rate and structure.

    When getting a mortgage renewal you need to consider the type of loan it will be. You can have a fixed interest rate or a variable interest rate mortgage. Your renewal can also have closed or open terms. When getting a mortgage renewal the remaining amount of the principal interest and the frequency and structure of payments are important factors to discuss with your lender.

    Difference Between Mortgage Renewal & Refinance?

    A mortgage refinance is when you have an existing mortgage agreement that you break to start a new mortgage agreement. This can be done with your current lender or with a new one. A mortgage renewal is when the term of the mortgage is reaching maturity and you are seeking a new term to cover the next portion of the remaining loan. On the other hand mortgage refinancing can be used to consolidate debts, access the built up equity in your home, or for other projects such as home renovations.

    Mortgage Renewal Process

    Your current provider is required to provide you with a mortgage renewal offer, or to inform you if they will not be providing you with a renewal. This must be done a minimum of 21 days before the term of your mortgage is due to end. You can and should shop around and apply for a renewal prior to this to secure a better rate or payment structure. It is advised to start thinking about your mortgage renewal 3 to 4 months prior to the end of your current mortgage term. Taking a long-term approach can better help you to achieve your financial goals.


    • Consider Your Current and Future Financial Position: A lot can change over the course of your mortgage term. Before you start looking for a mortgage renewal, take the time to assess how your income and expenses have changed and to look at what you are expecting over the next few years. You may be expecting a big expense or you may be considering moving. Understanding your financial position allows you to make a better decision.
    • Assess your Mortgage Needs: Once you have an understanding of your financial position you can ask yourself what you are looking for in a mortgage renewal. Does your budget allow you to increase your payments so you can pay off your mortgage faster? Do you want a different payment structure compared to what you had before? Do you want to consolidate any debts or use any of the equity you’ve built up? Do you want to add any insurance policies with your mortgage renewal? Are you satisfied with the services provided by your current lender? When you have your answer to these sorts of questions you can proceed to shopping around for the best deal for your mortgage renewal
    • Shop Around and Negotiate for a Better Interest Rate and Deal: You will want to start shopping around well ahead of time. 3 to 4 months prior to the completion of your mortgage term you will want to start looking at your options. Having the time to contact multiple brokerages and lenders gives you the opportunity to negotiate a better interest rate and terms for your mortgage renewal. Applying for a renewal with your current lender can be easier as a new lender will require a “stress test” to determine if your financial situation will allow you to make and maintain payments. Negotiating with more than one lender may allow you to secure a better interest rate.
    • Make your Decision: Once you’ve shopped around and negotiated a satisfactory arrangement for your mortgage renewal you are ready to renew. If you’re staying with the same provider you may even be able to start this new agreement before the terms of your existing mortgage end. If you choose to go with a different lender then you should give yourself at least 21 days for paperwork and processing to ensure there are no gaps in your coverage. If you decide to switch lenders then you should be aware of any additional costs that may come with your renewal, including any set-up, processing, and transfer fees, and any appraisal and administrative fees.

    Mortgage Renewal Tips

    A mortgage renewal can be a useful tool that may save you money but that depends on your existing mortgage, your financial situation, and the market. Depending on the context a refinance may not be the option for you.

    Start Shopping Early

    Shopping around can take time. Applying for a mortgage renewal with a different lender may require you to go through a financial stress test to see if you can make and maintain your payments. You will likely be asked to provide proof of income, proof of ownership, and various other documents as part of the application process. Starting 3 or 4 months ahead of your renewal date gives you the time to negotiate the best possible deal for yourself.

    Negotiate

    Your mortgage renewal is an opportunity for you to negotiate with lenders to achieve a better outcome for yourself. When you start shopping around early you have the time to receive offers from multiple lenders that you can leverage to secure a better deal with your current lender or other lenders. You can negotiate your rate, your payment structure, mortgage insurance, and even administrative fees and costs.

    Look at Multiple Lenders

    Your current lender may have been the best option for you when you first got your mortgage but that may not be the case when it comes time for your mortgage renewal. While it may seem more convenient to go with your current lender your financial goals and situation may have changed and the market may have changed since you first signed your mortgage. Consider your needs and goals for your mortgage renewal, including rates and payment structure, and go with a lender that best fits them. Many lenders will even be willing to let you switch to them for free by waiving registration costs and associated fees.

    Get a Rate Hold

    Once you have received an offer for your mortgage renewal from a lender you should ask for a rate hold. With a rate hold your mortgage rate won’t go up from what you have been offered or negotiated for even if the market changes. If rates go down you can still negotiate again. Most lenders are willing to provide a rate hold of up to 120 days.

    What is Required to be on Your Mortgage Renewal Statement

    If your mortgage is with a federally regulated institution there are requirements to documentation that must be met. The lender must provide you with a mortgage renewal statement at least 21 days before the end of your existing term. This renewal statement should have the same information as your existing mortgage contract such as:

    The remaining principal or balance of the loan at the renewal date
    The mortgage interest rate
    The payment frequency and structure
    The term or duration of the contract
    A list of any charges or fees that apply

    The lender may send you a mortgage renewal contract at the same time as the renewal statement. If your lender will not be renewing your mortgage then they are required to inform you at least 21 days before the end of the existing term.

    What Happens if Your Mortgage Renewal is Denied?

    In most cases, as long as you have been making consistent payments, your current loan provider will typically agree to a mortgage renewal with you. However, there is a possibility that you may be denied by your existing provider or by a new lender.

    Why Your Mortgage Renewal may be Denied?

    When applying for a mortgage renewal lenders will look at your overall financial situation including your total debts, your credit score, and your income. Whether you are with the lender already or you are applying for a renewal with a different provider they will assess your profile and determine if they are willing to finance your mortgage. In most cases, unless there have been significant changes to your finances, you should be able to secure a mortgage renewal.

    What to Do if Your Mortgage Renewal is Denied?

    If your mortgage renewal application is denied by a lender you can still shop around and apply with a different lender. Banks and credit unions will have stricter requirements than other lenders. You can still apply with trust companies and institutional lenders who specialize at dealing with people with a lower credit score or debt profile than what banks are typically comfortable with. Additionally, a private lender may be willing to provide you with a mortgage renewal. In most situations you will be able to find a lender willing to provide you with a renewal.

    Commonly Asked Questions

    A minimum of 21 days before the term of your mortgage is due to end, your current provider must provide you with a mortgage renewal offer or inform you if they will not be providing you with a renewal. You can shop around and apply for a renewal prior to this.
    You should start the process of looking for a mortgage renewal 3 to 4 months before your term is due to finish. If you will be staying with your existing lender you should be able to renew up to 120 days ahead of time without penalty. If you are changing lender you can reach an agreement to switch over when the current term ends.
    When negotiating your mortgage renewal you can discuss changes in the payment amounts and structure with your lender. You may be able to come to an agreement that has a lower or less frequent payment structure. Similarly, you can negotiate other changes to your mortgage including any changes in the interest rate or attached insurance policies.
    With a mortgage renewal lenders need to be sure that you can make payments so they assess your finances, including your credit score, total debts, and income. If your renewal is denied by your current provider you can still shop around with other providers like trust companies and private lenders.

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    Win A Free Mortgage Payment

    Register your mortgage renewal date with Mortgagesquad.ca and you could WIN your first month’s mortgage payment upon renewal (see terms and conditions). When you register your renewal date with us, you are securing the lowest interest rate possible up to four months prior to your mortgage coming due. So, if rates go up prior to your mortgage renewing, you can still get the lower rate. If rates go down, you will still get the lower rate… it is a WIN WIN FOR YOU.

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