5 Tips for Renewing Your Mortgage
With the most popular mortgage length in Canada being 30 years, chances are you will need to renew your mortgage term at least a few times before your home is fully paid off. If you are renewing your mortgage, the best-case scenario is to renew your mortgage on a new term with a lower mortgage rate. While it may be tempting to simply sign the first offer that arrives in the mail, doing so could cost you thousands in potential savings. By treating your renewal as a strategic financial milestone, you can ensure that your home remains an affordable and productive part of your overall investment portfolio.
Even though mortgage rates are directly tied to the policy interest rate set by the Bank of Canada, there are steps you can take to help ensure you get the best mortgage rate at the time of renewal. Proactivity is your greatest asset in a fluctuating market, as it allows you to lock in favourable rates before they potentially rise. Understanding the factors that influence lender decisions will give you the confidence to negotiate terms that reflect your current financial strength.
These include:
1. Take a holistic view of your finances
When the renewal forms from your current mortgage provider arrive, you should look at your current financial state and where you plan on being in the next 3-5 years. Ask yourself, does my current mortgage provider offer a product that works with my goals? For example, if you know you will be looking to move to a new home, city, or even downsize/upsize in the next few years, it wouldn’t make much sense to sign a five-year fixed-rate mortgage. Perhaps look for a 3-year mortgage instead. Your mortgage should never exist in a vacuum. It needs to complement your retirement savings and daily cash flow requirements. If you expect a significant change in income or family size, now is the time to adjust your payment structure accordingly.
If the new mortgage product offered to you will not go against your financial plans, accept it.
2. Don’t wait until the last minute to shop around
You should begin the process of looking into other lender’s rates a few months before your mortgage matures. You can even ask your current lender for their quote at this time. This will help avoid a last-minute scramble to find a new mortgage provider if you do not come to a new agreement with your current provider. Securing a rate hold early on can protect you against market volatility while you weigh your various options. This buffer period also gives you the necessary time to correct any errors on your credit report that might otherwise prevent you from getting the most competitive offers. Securing a rate hold early on can protect you against market volatility while you weigh your various options. This buffer period also gives you the necessary time to correct any errors on your credit report that might otherwise prevent you from getting the most competitive offers.
3. Request a better mortgage rate
Your existing mortgage provider will send you renewal forms or even give you a call in an effort to lock you into the current going rate. Quite often this works, as people are comfortable renewing with their existing provider, it is easy for them, and the rate is the same as what is advertised on their website. However, the posted is hardly ever their best rate and if you request a better rate for being a loyal customer chance are you will get one, especially if you are in good standing and have made all your previous payments on time. If you are told they cannot offer a better rate, ask if they will match a quoted offer from another institution. This is where the data you collected from your research early on can pay off.
4. Use a mortgage broker
When shopping for a better deal to refinance your mortgage, contacting a mortgage broker saves you time and stress. Mortgage brokers work for you and not the lenders, their main goal is to get you the best deal possible so you will sign with one of the providers they represent. A mortgage broker will provide you with a comprehensive list of lenders and their rates. Because brokers have access to a wide network of both traditional banks and private lenders, they can often find niche products that aren’t available to the general public. They can also handle the complex negotiations on your behalf, ensuring that you understand the fine print regarding penalties and prepayment options. This will save you’re the time and energy required to get multiple quotes yourself and will allow you to switch lenders easily and with peace of mind.
5. Start the re-mortgaging process early
On occasion, you may not want to renew with your existing provider. If this is the case and you wish to switch lenders. Do not wait until your mortgage matures, start your research as early as possible. The process of switching your mortgage provider is very similar to that of applying for a new mortgage. You will need to submit paperwork including a copy of your mortgage renewal letter, proof of income, proof of homeownership, and proof of property insurance. The new provider may take some time getting back to you with a rate and approval notice, so starting early affords you the time to complete the process without having to worry about running out of time.
In short, do not renew your mortgage without considering your options, and seek the assistance of a mortgage broker so that you will not need to do all the heavy lifting and research on your own. By following these steps, you turn a routine administrative task into a powerful opportunity to improve your financial health. A well-planned renewal is a vital step in the journey toward being mortgage-free and achieving long-term wealth.
