When your mortgage term is coming to an end, you have an important decision to make. You can renew your mortgage with your current lender, negotiate new terms, or explore offers from other lenders. Although renewing with your existing lender may seem like the easiest option, it may not always provide the terms that best suit your current financial situation.
A mortgage broker can help you review your options before you commit to a new mortgage term. From comparing rates and lenders to reviewing mortgage features and potential switching costs, a broker can help you make a more informed decision. For Canadian homeowners, starting the renewal process early can also provide more time to compare options and negotiate suitable terms.
What Is a Mortgage Renewal?
A mortgage renewal occurs when your current mortgage term ends, and you still have an outstanding balance. Since most homeowners need several mortgage terms to fully repay their mortgage, renewal is a normal part of the mortgage process.
Before the end of your term, your lender will generally send you a renewal statement outlining important details about your mortgage and the terms being offered. However, receiving a renewal offer does not mean you have to accept it. You can review the offer, negotiate with your current lender, or consider switching to another lender.
This makes your renewal an opportunity to reassess your mortgage instead of simply continuing with the same arrangement. You can also review this guide to mortgage renewals for more information about the process.
Why Should You Work With a Mortgage Broker for Your Renewal?
Your financial situation may look very different from when you first obtained your mortgage. Your income, expenses, debts, savings, family circumstances, and long-term plans may have changed. As a result, the mortgage that suited you several years ago may no longer be the best fit.
A mortgage broker can review your current circumstances and help you compare mortgage options available through different lenders. Instead of approaching each lender individually, you can work with a professional who can help you evaluate different rates, terms, and mortgage features.
The purpose is not simply to find the lowest interest rate. A mortgage should also provide terms and features that match your financial goals. Understanding how to choose the right mortgage broker can also help you find the right professional for your needs.
Step 1: Review Your Current Mortgage
Before looking at new options, it is important to understand your existing mortgage. Your mortgage balance, interest rate, remaining amortization, payment schedule, prepayment privileges, and renewal date can all affect your next decision.
Your broker can help you review these details and identify what you may want to change during the renewal process. For example, you may want a different term, greater prepayment flexibility, or a payment structure that better suits your current budget.
Having a clear picture of your existing mortgage also makes it easier to compare a renewal offer with other options.
Step 2: Discuss Your Current Financial Goals
A mortgage renewal is a good time to consider what you want to accomplish over the next few years. Your priorities may have changed since you first took out your mortgage.
You may now want to pay off your mortgage faster, lower your monthly payments, make larger lump-sum payments, or maintain greater flexibility. You may also have other financial commitments that need to be considered when choosing a new mortgage.
A mortgage broker can discuss these goals with you and help identify mortgage options that align with them. This can make the renewal process more meaningful than simply accepting the rate offered by your existing lender.
Step 3: Compare Your Lender’s Renewal Offer
One of the most important steps is reviewing the offer from your current lender. It may be convenient to renew with the same institution, but convenience does not necessarily mean you are getting the most suitable mortgage.
A mortgage broker can help you evaluate the proposed interest rate, term, payment structure, prepayment privileges, penalties, and other conditions. You can then determine how competitive the offer is compared with alternatives.
You may also be able to negotiate with your existing lender. Having a better understanding of what other lenders are offering can give you more information when discussing your renewal terms.
For additional guidance, you can review these tips for negotiating a better mortgage renewal.
Step 4: Explore Other Lenders
You are not required to renew your mortgage with your current lender. If another lender offers terms that better suit your needs, switching may be worth considering.
This is one area where a mortgage broker can save you time. Rather than contacting multiple lenders yourself, a broker can review available mortgage products and help identify options that may fit your circumstances.
However, switching lenders should not be based on the interest rate alone. You should also consider the costs involved, the mortgage features available, the flexibility of the loan, and how the new mortgage fits your longer-term plans.
Step 5: Compare Mortgage Rates and Terms
Interest rates are an important part of a mortgage renewal, but the lowest rate is not automatically the best option.
For example, one mortgage may offer a lower rate but provide fewer prepayment privileges or less flexibility. Another mortgage may have a slightly higher rate but include features that are more useful for your financial plans.
Your mortgage broker can help you compare fixed and variable options, different term lengths, payment structures, and other features. This allows you to look at the overall value of each mortgage rather than focusing on one number.
You can also review fixed vs. variable mortgage rates in Canada to better understand the differences between these options.
Step 6: Review Your Amortization and Payments
Renewal is also an opportunity to review how quickly you want to repay your mortgage.
If your income has increased since you first obtained your mortgage, you may be able to increase your regular payments or make additional payments. Doing so can help reduce your mortgage balance faster and potentially lower the amount of interest you pay over the life of the mortgage.
On the other hand, if your monthly expenses have increased, you may need to prioritize a payment that is more manageable for your current budget.
A mortgage broker can help you understand how changes to your payment amount, frequency, or amortization could affect your mortgage. If paying off your mortgage sooner is one of your goals, you can also review these strategies for paying off your mortgage more quickly.
Step 7: Consider Whether Refinancing Makes More Sense
In some situations, a standard renewal may not be enough to meet your current financial needs. You may have accumulated other debts, need funds for a major renovation, or want to access some of the equity in your home.
Depending on your circumstances, refinancing may be an option worth discussing. Refinancing and renewing are not the same thing. A renewal generally involves continuing your mortgage for another term, while refinancing can involve changing the amount you borrow or restructuring your existing mortgage.
A mortgage broker can help you determine if refinancing should be considered alongside a regular renewal. You can learn more about mortgage refinancing and how it works before deciding which option may be appropriate.
Step 8: Calculate the Cost of Switching
If you are considering a different lender, it is important to look at the complete financial picture. A lower mortgage rate may appear attractive, but switching lenders can involve costs.
Depending on your circumstances, these may include appraisal, legal, registration, discharge, or other administrative costs. Some lenders may offer incentives to cover certain expenses, but the details can vary.
Your broker can help you compare the potential savings from switching with the costs involved. This makes it easier to determine if changing lenders provides a meaningful financial benefit.
Step 9: Prepare Your Documents
If you decide to explore a new lender, you may need to provide documentation to support your mortgage application. The exact requirements depend on the lender and your financial situation.
You may need information about your income, employment, existing mortgage, debts, assets, and property. Self-employed borrowers may have additional documentation requirements.
Preparing your documents early can help make the process smoother and reduce unnecessary delays. Knowing what to bring to a mortgage appointment can also help you prepare for discussions with your mortgage professional.
Step 10: Review the Final Mortgage Before Signing
Once you have compared your options and selected a mortgage, take the time to review the final agreement carefully.
Look beyond the interest rate and make sure you understand the term, payment amount, amortization, prepayment privileges, penalties, portability, and applicable fees. If something is unclear, ask your mortgage professional or lender for an explanation before signing.
Your mortgage is a significant financial commitment, so understanding the agreement is an important part of the renewal process.
When Should You Start Planning Your Mortgage Renewal?
It is generally better to start reviewing your options several months before your mortgage term ends. Starting early gives you time to understand your current mortgage, assess your financial goals, compare lenders, and negotiate suitable terms.
Waiting until the last minute can make the process more stressful and may leave you with less time to evaluate alternatives.
By starting early, you can approach your renewal with a clearer understanding of what you need from your next mortgage term. You can also review these mortgage renewal tips as you prepare for the upcoming term.
Should You Renew With Your Current Lender or Switch?
There is no universal answer. Staying with your existing lender may be convenient, particularly if the lender offers competitive terms and you are satisfied with the mortgage features and service.
However, switching may be worth considering if another lender can offer terms that better suit your financial circumstances. The right choice depends on the overall cost, flexibility, mortgage features, and your financial goals.
A mortgage broker can help you compare these options so that your decision is based on more than convenience or an advertised interest rate.
How Can a Mortgage Broker Make the Renewal Process Easier?
A mortgage broker can act as a point of contact throughout the renewal process. Instead of researching every available option on your own, you can discuss your situation with a professional who can help you assess different mortgage solutions.
A broker can help you review your current mortgage, compare available options, understand potential costs, and prepare for the application process if you decide to switch lenders. They can also help explain mortgage terms and features that may be difficult to compare when reviewing offers on your own.
The benefit is having someone help you navigate the process while keeping your financial goals in focus.
Get Help With Your Mortgage Renewal
Your mortgage renewal is an opportunity to review your options and choose terms that fit your current financial situation. If you are approaching the end of your mortgage term, AKAL Mortgages Inc. can help you compare available mortgage options, review rates and terms, and understand the renewal process.
Instead of automatically accepting your lender’s renewal offer, speak with our team to discuss your options and make an informed decision about your next mortgage term.
Frequently Asked Questions
How can a mortgage broker help with renewal?
A mortgage broker can compare mortgage rates and terms from different lenders, review your current mortgage, and help you find an option that fits your financial goals.
Is it better to renew with my current lender or switch?
It depends on your situation. Comparing your current lender’s offer with other options can help you determine which mortgage provides better rates, terms, features, and overall value.
When should I contact a mortgage broker before my renewal?
It is best to start reviewing your options several months before your mortgage term ends. Starting early gives you more time to compare lenders and negotiate suitable terms.
Can a mortgage broker negotiate my mortgage renewal rate?
Yes. A mortgage broker can compare available rates and may help you negotiate competitive terms based on your financial situation and the lenders they work with.
Can I switch lenders when my mortgage is up for renewal?
Yes. You can generally switch to another lender when your mortgage term ends, provided you meet the new lender’s qualification requirements and complete the required transfer process.
What should I consider before renewing my mortgage?
Consider the interest rate, mortgage term, payment amount, amortization, prepayment privileges, penalties, fees, and how the mortgage fits your current and future financial goals.