Sarah Colucci's Mortgage Blog
Stay enlightened about mortgage & real estate news in Canada.
What it means to renew your mortgage
When you get a mortgage with a lender, your contract is in effect for a specific period of time. This is called the mortgage term and it can range from a few months to five years or longer.
You have to renew your mortgage at the end of each term unless you pay the balance in full. You'll most likely require multiple terms to repay your mortgage in full.
Your renewal statement
If your mortgage contract is with a federally regulated financial institution, such as a bank, the lender must provide you with a renewal statement at least 21 days before the end of the existing term. Your lender must also notify you 21 days before the end of your term if they won’t renew your mortgage.
The lender will provide you with paper statements or electronic statements, if you consent to this method of communication.
A renewal statement must contain the following information:
You may receive a mortgage renewal contract at the same time as a renewal statement.
Review your mortgage needs
When your mortgage term comes to an end, you have to pay off your mortgage in full or renew it. This is a good time to review your mortgage needs and make sure you have the right product.
To help you find the right mortgage, consider if:
You don’t have to renew your mortgage with the same lender. You can move your mortgage to another lender if their conditions better suit your needs.
Start shopping around a few months before the end of your term. Contact various lenders and mortgage brokers to check if they offer mortgage options that better suit your needs. Don’t wait until you receive the renewal letter from your lender.
Negotiate for a better interest rate
Negotiate with your current lender. You may qualify for a discounted interest rate that is lower than the rate quoted in your renewal letter. Tell your lender about offers you received from other financial institutions or mortgage brokers. You may need to provide proof of the offers you receive. Make sure you have this information on hand.
If you don’t take action, the renewal of your mortgage term may be automatic. This means you may not get the best interest rate and conditions. If your lender plans on automatically renewing your mortgage, it will say so in the renewal statement.
Switching to another lender
You may decide to switch your current mortgage to another lender for a loan of the same amount. If this is the case, the new lender will need to approve your mortgage application. The new lender may use different criteria than your original lender to decide if you qualify for a mortgage.
Costs to change lenders
Make sure you find out the costs of changing lenders, such as:
Mortgage loan insurance premiums when you switch lendersYou may have to pay a new mortgage loan insurance premium when you switch lenders, if:
You need to sign the registration documents that are part of your mortgage contract. You may have to meet with your lawyer or notary.
Switching mortgage lenders if you have a collateral charge
Your mortgage can be registered with a collateral charge. If that’s the case and you want to switch lenders, you may have to pay fees. These fees cover the removal of the charge from your existing mortgage and the registration of the new one.
You must meet certain criteria to remove the charge from your mortgage. You must repay in full or transfer to the new lender all loan agreements secured by the collateral charge. This includes car loans or lines of credit.
To find out if your mortgage has a standard or a collateral charge, ask your lender, lawyer or notary. Allow a few months before your renewal date. This will allow you time to consider your options based on how your mortgage is registered.
By: Sarah Colucci
Senior Mortgage Agent, Lic. M14000929