August 23rd 2021
Where to Start with Your Mortgage Renewal
By Rachel Burke
When you receive a mortgage from a lender, there is a specified period of time in which that mortgage is in effect. This is often referred to as a "mortgage term." This particular contract can last from several months to a few years or longer.
You must renew your mortgage when the term comes to an end if you have not paid your balance in full. Mortgage owners rarely pay off their mortgage after the first mortgage term, so many Canadians experience the mortgage renewal process. Currently, 36.3% of Canadian homeowners carry a mortgage, and the number is only rising. Despite such a large number of mortgage owners, many Canadians do not know what it means to "renew" your mortgage.
Some people regard their mortgage renewal like a dentist appointment or doctor's check-up, treating it like just another day on the calendar. However, renewing your mortgage can be a much more rewarding experience that can benefit the homeowner in the long run. In this article, I will discuss some key mortgage renewal tips that you can use to get the most out of your mortgage.
How to Get the Most from Renewing Your Mortgage
There are many ways to benefit from the mortgage renewal process. The first step into getting the most from your mortgage renewal is to review your mortgage needs. Sounds simple enough, but for some Canadians, their mortgage terms can last years, meaning they might be in a different position financially or otherwise when their mortgage term ends. Reevaluating your needs helps you plan a term budget, change the frequency of mortgage payments, or make additional payments.
Your lender will provide you with your mortgage statement at least 21 days before the end of the current term. Using this statement to reevaluate your needs is crucial as it will lay out the terms and conditions of your new mortgage term. When checking over your lender's renewal statement, ensure it contains the current or remaining balance at the renewal date, the interest rate, the payment frequency, the term, and any fees or charges that may apply.
It is against the Financial Consumer Agency of Canada's regulation if any of the items mentioned above are missing from your renewal, so be sure to check. It is also important to note that you do not have to continue with your previous lender when renewing your mortgage. You can opt to switch to a new one if they give you better mortgage renewal rates.
Switching Mortgage Lenders
The Financial Consumer Agency of Canada (FCAC) encourages Canadians to shop around for new lenders or compare lender mortgage rates much earlier than the 21-day statement from their lenders. The FCAC recommends you review and consider other options from lenders as early as 5 months before your mortgage term is up. Many Canadians do this to benefit from lower rates or other perks. Some lenders offer better interest rates, better monthly payment options, or better terms and conditions, so it's important to know what is available to you.
When switching lenders, there are a few things you should consider first. Changing your mortgage lender will cost you a fee, and there are several fees to consider. If you switch lenders, you may have to pay a setup, discharge, registration, transfer, assignment, appraisal, or administration fee to your previous or new lender. Some lenders might decide to pay for these fees themselves when you switch to new services, so always check with your lender about renewal terms.
Payments may also apply if you register your mortgage with a collateral charge. The fee would cover removing the charge from your previous mortgage and registering that charge to your new one. In some situations, you may have to pay a new mortgage loan insurance premium when you change lenders. The premium is only applied if the total amount of your loan is increased or you extend the amortization period.
If you currently possess mortgage loan insurance on your previously existing mortgage, be sure to tell your new lender because it will help you avoid paying the premium twice. These fees can seem overwhelming, but every Canadian mortgage owner needs to know that you always have the power of negotiation.
Negotiating Mortgage Interest Rates
Another great way to benefit during your mortgage renewal period is to negotiate a better interest rate with your current or new lender. It’s important to find out if you qualify for a lower interest rate than the rate you currently have or were offered in your upcoming renewal letter.
People can be eligible for mortgage discounts for various reasons; Canadians above 65 years old, teachers, and nurses all have potential mortgage discounts they can get through their lenders. You might qualify for a new discount on your mortgage since the last renewal term, so be sure to negotiate with your new or current lender.
If you are currently in a mortgage with a lender and believe they won't let you switch lenders or negotiate your interest, know that it is illegal for them to tie you in a contract against your will. The Bank Act of 1991 states, "lenders cannot coerce a person to obtain a product or service from a particular person, including the bank and any of its affiliates, as a condition for obtaining another product or service from the bank."
Allowing homeowners to find deals they usually wouldn't creates a competitive market for lenders. However, finding these discounts and prices can be difficult. It is not always easy to see what other mortgage lenders offer or understand how you can qualify for mortgage discounts.
Additional Support Renewing your Mortgage
Now that you have all this information on renewing your mortgage, you can take the first steps as a homeowner and review your mortgage needs. Some of the specifics of what is out there for mortgage renewal rates can be difficult to find or understand, which is why it helps to have experts to help you along the way.
At Properly, experts can work through your mortgage renewal with you and ensure you access all the available options. It's helpful to have a home buying expert to help calculate premiums, fees, and additional charges when reviewing your mortgage needs. They can also help determine if staying with your current lender is the right choice or if you should consider switching. Whatever you decide to do for your mortgage renewal is ultimately up to you. You can confidently sign the mortgage renewal papers every term by using companies like Properly to help make the right choice.