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Equipe Distinction | Courtiers hypothécaires

Mortgage Renewal

As your mortgage nears maturity, your lender usually sends you a renewal offer. How does this affect the repayment of your loan? Find out more about mortgage renewal from the mortgage brokers at Equipe Distinction!

Looking to improve your mortgage terms with a renewal?

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mortgage renewal

Multi-Prêts

What is a mortgage renewal?

First of all, mortgage renewal should not be confused with refinancing. Refinancing allows you to borrow more money from your bank or another institution to carry out a personal project or consolidate your debts, for example, by using the equity available in your property. A mortgage renewal, on the other hand, does not entitle you to any additional financing. Instead, you continue to repay your mortgage, but on new terms.

Renewing your home mortgage is usually done four to six months before your current mortgage expires. Your lender will send you a renewal offer, giving you the choice of paying off your mortgage in full or spreading the payments and remaining mortgage balance over a new term. At this stage, you can negotiate an interest rate and new financing terms. It’s vital to check current mortgage rates and consider the mortgage renewal options available to ensure you get the best possible deal.

Where it gets interesting is that mortgage rules in Canada allow you to renew your mortgage with your current lender OR with another financial institution. A mortgage contract is not like a marriage contract: at the end of the term, you are free to choose the lender that offers you the best terms. We therefore recommend that all our customers take a look at the promotions on offer just about everywhere before renewing with their bank. And if the grass is greener in the neighbour’s yard, don’t hesitate to jump the fence (hi! hi!)!

That said, there are few, if any, fees associated with renewing a mortgage, as most lenders will cover the transfer costs. However, if you decide to change lenders before the end of your term, you’ll have to take your current lender’s penalty into account in our scenarios. And since this process must be carried out rigorously, using the expertise of a specialist broker is a sensible choice. Our professionals on the Distinction team will be happy to show you the options available to you. Believe it or not, you could be in for some very pleasant surprises!

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When to shop

When should you shop around for your mortgage renewal?

Plan ahead

For a stress-free process, it’s best to contact us four to six months before your current mortgage expires.

 

This gives you optimum visibility of future interest rate trends and the progress of your personal or financial situation.

Work with an expert

A broker from the Distinction team will analyse your overall financial situation, i.e. your income, debts, short-, medium- and long-term goals, and so on.

 

Armed with this information, he or she will go hunting for the best financing terms on your behalf.

Choose a turnkey service

While your broker is away on a mission, you can get on with your day-to-day activities (looking after your children, walking your dog, shopping for your mother-in-law, watching videos on TikTok, etc.).

 

Your broker will take care of everything, without it costing you a penny!

The advantage of independent mortgage brokers

Another big advantage of doing business with the Distinction team is that we have quick access to a number of financial institutions, so you don’t have to go through long and tedious searches. What’s more, by knowing your file well, we can help you renew your mortgage in a few years’ time. A harmonious long-term relationship with you is what we want more than anything!

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The possibilities

Since renewal is an opportunity to change certain mortgage clauses, you should make the most of it! Ideally, you should remove certain contractual provisions that are unfavourable to you. Here are some of the financing options and conditions to look out for:

  • Fixed or variable rate?
  • Reduce your repayments to pay off your capital more quickly?
  • What are the new lender’s early repayment terms?
  • How does the new lender calculate the mortgage penalty in the event of full repayment before the end of the term?
  • What payment frequency options does the new lender offer you (monthly, fortnightly, weekly, accelerated, non-accelerated, etc.)?
  • What is the new lender’s customer service like?
  • Will the new lender record a higher guarantee than the capital borrowed?
  • Is the new lender’s loan deed transferable free of charge at the end of the term?

Why not take the opportunity to add a mortgage line of credit to your financing? If the equity in your property allows you to do so and you think you’ll need liquidity in the short or medium term, a mortgage line of credit could be an excellent product for you.

Are you hesitating and afraid of making a mistake? That’s normal, especially if you’re not familiar with this area! When you renew your mortgage, a mortgage broker from the Distinction team will take a close look at your finances and your professional and personal situation to confirm whether this product is right for you: working with an experienced advisor is the best way to make an informed decision.

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Take charge

Mortgage renewal is the perfect time to take stock of your finances. Ask yourself the right questions, for example

  • Are your current monthly mortgage payments too high?
  • Can you afford additional mortgage payments?
  • When do you expect to repay your mortgage in full?
  • Could your job prospects (or a change in your personal life) affect your budget and your ability to repay?
  • Are you thinking of moving to a new home in the next few years?
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This is often a good way of assessing whether your borrowing profile has improved or deteriorated, and adjusting your mortgage renewal accordingly.

Mortgage renewal or transfer?

Renewing your mortgage with the same lender is a good idea if you have an excellent relationship with them and can negotiate better terms for the new term.

However, you are always free to transfer your mortgage to a lender who can offer you even more attractive terms.

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When is it advantageous to transfer to a new mortgage lender?

Transferring is more advantageous if you find a financial institution willing to grant you a new term better suited to your financial situation at the time of renewal.

Do you have any questions about renewing your mortgage, or would you like expert advice on how to go about it? Make an appointment with one of the mortgage brokers on the Distinction team by filling out our contact form!

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What is mortgage renewal and why is it important?

Mortgage renewal is the process of extending your mortgage to the end of your current mortgage term. This process allows you to renegotiate the terms of your mortgage, including interest rates, amortization period, and payment options. In Canada, mortgages generally have terms of 1 to 5 years, after which they must be renewed.

Renewal is an opportunity to review your financial situation and needs, and potentially obtain a better mortgage rate or more favourable terms. It’s crucial to plan ahead to maximise the financial benefits and minimise the risks. A broker can provide you with personalised advice and help you navigate the various renewal options available.

How do I choose between a fixed and a variable rate when renewing?

Choosing between a fixed and a variable rate depends on your risk tolerance and your financial situation. A fixed mortgage rate gives you stability in your monthly payments, because the interest rate remains constant throughout your mortgage term. This makes it easier to plan your budget and protects you against rising interest rates.

On the other hand, a variable mortgage rate may be more advantageous if interest rates fall, but it carries a higher risk because of the possibility of rates rising. The decision should take into account your personal finances, the frequency of payments you can manage, and your ability to absorb a possible rise in rates. The Bank of Canada plays a crucial role in influencing key rates, which affects variable rates.

What are the penalties and fees associated with mortgage renewal?

When renewing your mortgage, it’s important to understand the potential penalties and fees. If you decide to pay off your mortgage early or refinance before the end of your term, you may face prepayment penalties. These penalties may vary depending on your lender and the terms of your mortgage contract.

In addition, there may be fees associated with valuing your property, administrative costs or obtaining new mortgage loan insurance. It’s essential to read the renewal letter carefully and discuss your renewal options with your financial institution or broker. By assessing all these conditions, you can make an informed choice that’s suited to your financial situation.

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