How Early Can You Renew Your Mortgage?
Navigating your mortgage renewal can feel tricky, especially when you're trying to find the right time to secure the best rates. In Canada, you can begin the mortgage renewal process up to 180 days (6 months) before your current term ends.
Key Takeaways
You can start renewing your mortgage up to 180 days before the end of your term.
Early renewal might help you secure lower interest rates.
Check for any penalties or fees associated with early renewal.
Understanding Mortgage Renewal
Mortgage renewal is the process of renewing your mortgage agreement with your lender when your current term ends. It gives you a chance to keep your existing mortgage or make changes to better fit your financial goals.
Your lender will send you a renewal statement with important details about your mortgage. This usually comes at least 21 days before your current term ends. The statement includes your remaining balance, interest rate, and other key terms.
You can also choose to renew your mortgage early, often 120 days before the term ends. Renewing early can help you lock in a favourable interest rate if you think rates might rise.
When renewing, you can adjust the interest rate type or term length. Changing these will impact your monthly payments. You can’t change your mortgage amount or the amortization at renewal.
Some lenders offer incentives or discounts at renewal, making it a good time to negotiate better terms. Always review any fees or penalties that may apply to changes you want to make.
Do You Need Approval for a Renewal?
There are 3 main options when renewing your mortgage:
Renewing with your current lender
Switching your mortgage to a new lender
Refinancing, either with your current lender or a new lender
Renewing your mortgage with your current lender does not require you to requalify or reapply.
Switching lenders or refinancing does require approval from the lender. If you’re thinking about switching lenders or refinancing, it’s especially important to speak with your mortgage broker early.
Determining the Best Time to Renew
When considering mortgage renewal, timing can be key. Most lenders allow you to renew your current mortgage up to 120 days or four months early. This period is known as the renewal window. It's a strategic time to lock in rates before they potentially increase.
Contact your lender. Ask them about your specific renewal options. Some lenders offer incentives, like lower rates, for renewing early. After you’ve received the information from your lender, your first call should be your mortgage broker, don’t sign on the dotted line before you understand if this offer is comparable to best market rates at other lenders.
You can renew with your current lender or you can compare rates with other lenders. Here’s a quick look at what to consider:
Interest Rates: Look at current rates and predictions for future trends.
Financial Goals: Decide if you want to renegotiate your payment schedule or increase your mortgage amount.
Lender Offers: Check if there are better offers, such as cash back, from your current or new lender.
If you plan to switch lenders, start the process early. This gives you time to gather information, negotiate, and handle any paperwork requirements.
Early Renewal Advantages
The key advantage of renewing your mortgage is the opportunity to lock in a favourable interest rate if you expect fixed rates to rise. After the pandemic, savvy borrowers looked to renew early, knowing that their mortgage rates would be higher if they waited until their mortgage expiry date to sign their renewal documents.
Your mortgage broker or team should be helping you strategically manage your renewal timing, if you’re worried that your renewal isn’t being managed and you’re not being notified of strategic opportunities, fill out our renewal reminder.
Spire Mortgage Team Renewal Reminder
Potential Costs of Early Renewal
Occasionally, you incur costs to renew your mortgage early. These costs are lender/loan dependant, but It's important to be aware of these potential cash outlays to secure that early renewal.
Prepayment Penalties: Some lenders charge a penalty if you renew your mortgage before the term ends. This fee compensates the lender for lost interest over the original loan term.
Interest Rate Differences: If the new rate is higher than your current rate, you might end up paying more over the life of your mortgage. (Your mortgage broker will help you identify a situation where a higher interest rate might make sense)
Fees and Charges: Early renewal might come with additional fees, such as administrative charges. These can vary by lender, so it's important to inquire about any costs upfront before making a decision.
Opportunity Costs: By renewing with your current lender, you may miss out on better offers elsewhere. Shopping around can be time-consuming, but it could lead to significant savings. Always weigh this against the convenience of sticking with your current lender.
When Should You Renew Your Mortgage?
Starting early gives you time to assess your mortgage needs. Think about your financial goals, possible interest rate changes, and whether you want to adjust your mortgage term.
Many factors, like interest rates and your unique financial situation, can influence when you should renew. For advice tailored to your situation, contact the mortgage brokers at Spire Mortgage.
