Many Canadians spend a lot of time ensuring their first mortgage is negotiated in their favour so they receive the best mortgage catered to their unique needs, but it’s equally important to look out for your best interest every time your mortgage comes up for renewal – every five years on average. Below are some mortgage renewal tips to keep in mind.
The renewal process represents a great time to review the details of your mortgage along with your personal financial situation to ensure they’re still in sync. Factors such as your income and expenses may have changed since you first obtained your mortgage, so you’ll want to take these into consideration.
Another very important thing to note is that you’re not obligated to renew your mortgage with your current lender. Mortgage renewal is, therefore, a good time to shop around, with the help of your mortgage agent, to see what other lenders are offering and perhaps save some money. Arash Sef has access to a wide variety of lenders and will do the legwork on your behalf to find the best mortgage options suited to your needs, potentially saving you thousands of dollars over the course of your new mortgage term.
Your mortgage agent will also help navigate the mortgage stress test, which often makes it difficult for first-time homebuyers to obtain a mortgage, and more cumbersome and expensive for those with mortgages up for renewal.
How soon can you renew a mortgage?
It’s smart to begin working with your mortgage agent about 120 days (four months) prior to your renewal date as many mortgages can be renegotiated within 90-120 days of renewal without facing a penalty for breaking your mortgage early.
If you decide to stay with your current lender at renewal, you’re not required to pass the stress test, but this shouldn’t stop you from shopping the competition for a better product offering and/or rate.
Your current lender will probably send you an early renewal offer to get you locked in with them for another term. Signing this offer is often not in your best interest! Be sure to have your mortgage agent look it over so you can also see what other lenders can do for you.
Beware that your current lender may be tempted to offer a higher interest rate upfront, knowing you’ll have to face the stress test if you switch to a different lender.
Typically, at renewal time, your mortgage balance is lower and it’s possible that your income has increased, so passing the stress test may not be an issue.
Renewal is also the best time to access some home equity to improve cash flow, pay down debt, send your kids to school, buy an investment property, etc, because you won’t be charged a penalty for breaking your mortgage.
If you don’t take any action, your current lender may automatically renew your mortgage, so make sure you’re prepared well in advance of the term expiring and don’t miss the opportunity to save money!
Have questions about more helpful mortgage renewal tips or regarding your mortgage in general? Answers are a call or email away.