Mortgage Renewal Tips: Don't Just Sign the Paperwork

When your mortgage term expires, your current lender will typically send you a renewal letter in the mail with their ‘best’ offer. Many Ontario homeowners simply sign this document and return it to avoid the hassle of shopping around, which is often a very expensive mistake. The rate offered in a renewal letter is rarely the lowest rate available in the market, as the bank assumes you will choose convenience over savings. By taking the time to shop your renewal, you can often find better terms and lower rates that can save you thousands of dollars over the next five years. You are in a position of power when your contract ends, so use it.

The renewal process should ideally start about four to six months before your actual maturity date. This gives you enough time to monitor market trends and lock in a rate with a new lender as a backup plan. If rates drop during that period, you can take advantage of the lower pricing, but if they rise, you are protected by your rate hold. Moving your mortgage to a new lender is called a ‘switch’ or a ‘transfer,’ and in many cases, the new lender will cover the appraisal and legal fees to earn your business. This makes the transition virtually seamless and cost-free for the homeowner in most standard scenarios.

During renewal, you also have the opportunity to change your mortgage structure without paying a penalty. If you have been in a variable rate and want the stability of a fixed rate, or if you want to change your payment frequency to bi-weekly, this is the time to do it. You can also choose to shorten your amortization if your income has increased, allowing you to pay off your home faster. Conversely, if you need to lower your monthly payments, you could potentially re-extend your amortization, though this may require a full refinance application. It is the perfect time for a total financial check-up to ensure your mortgage still fits your life.

Check your mortgage statement right now to find your maturity date and add a reminder to your calendar for five months prior. Do not wait for the bank's letter to arrive as it often comes too late to properly explore all of your alternative options. I can run a quick comparison for you against the bank's offer to show you exactly how much you could save by switching to a different lender. There is no cost to you for my services at renewal, so you have everything to gain by getting a second opinion. Let's make sure your next mortgage term is structured to your maximum advantage.