If you are one of the millions of Canadian homeowners with a mortgage, the time will come when you will need to renew it—typically every five years. Yet, despite this being a regular part of homeownership, many people make costly errors during the mortgage renewal process.
Mortgage renewals offer a golden opportunity to reassess your financial situation and save thousands of dollars over the life of your loan.
Unfortunately, many Canadians fall into the trap of complacency, letting their mortgages auto-renew without a second glance.
Mistake #1: Automatically Renewing With Your Current Lender Without Shopping Around
When your mortgage term ends, it is easy to stick with your existing lender. You receive a renewal letter, sign it, and mail it back—job done, right? Not quite.
Many Canadians do not realize that lenders often send out renewal offers with less-than-competitive rates. Banks count on your inertia—they assume you won’t take the time to shop around. As a result, you could end up locked into a higher interest rate, costing you thousands over the term.
The Consequences
- Higher interest costs: Even a slight difference in interest rates—say, 0.25%—can translate into thousands of dollars over five years.
- Missed opportunities for better terms: You can find more favourable prepayment privileges or flexible payment options elsewhere.
- Limited product options: Your current lender may not offer the most suitable mortgage products for your changing needs.
The Solution
Shop around before your renewal date. Start comparing mortgage offers at least 4-6 months before your term ends. Use online comparison tools or consult a mortgage broker who can present multiple options from various lenders.
Ask questions like:
- Can I get a better rate elsewhere?
- What features or flexibility does the new mortgage offer?
- What penalties would be involved if I broke the mortgage early?
Do not hesitate to negotiate with your current lender using competing offers as leverage. Loyalty doesn’t always pay—especially when it comes to interest rates.
Mistake #2: Not Reassessing Your Financial Goals and Needs
The Problem
Your life changes every few years, and so should your mortgage strategy. Yet, many Canadians renew their mortgage without revisiting their financial goals, income, lifestyle changes, or plans.
Mortgage renewal time is a strategic opportunity to align your home financing with your long-term goals. Failing to reassess can mean missing out on savings, flexibility, or growth opportunities.
The Consequences
- Overpaying interest unnecessarily: You may be able to switch to a shorter amortization and pay off your mortgage faster.
- Cash flow mismatch: A term or payment schedule that no longer suits your financial reality could add stress.
- Missed opportunities to consolidate debt: You may carry high-interest debt that could be rolled into your mortgage at a lower rate.
The Solution
Evaluate your current financial picture:
- Have your income or expenses changed?
- Do you plan to move, renovate, or retire soon?
- Are you carrying other debts?
- Would prepayment privileges help you pay off your mortgage faster?
Adjust your mortgage to match your needs:
- Consider a variable rate mortgage if rates are expected to stay low and you can tolerate some risk.
- Opt for a shorter amortization if you’re aiming to be mortgage-free sooner.
- Explore options with flexible features, such as lump sum payments or skip-a-payment clauses.
A mortgage is not a one-size-fits-all solution. Use this milestone to realign your loan structure with your current and future goals.
Mistake #3: Waiting Until the Last Minute to Renew
The Problem
Many homeowners put mortgage renewal at the bottom of their to-do list. Procrastination might seem harmless, but it can have serious financial repercussions.
Lenders typically send out renewal letters about 30 days before your term ends. If you wait until the last minute, you may feel rushed to accept whatever is on the table—often at a higher rate or less favourable terms.
Worse, if you miss the renewal deadline, you could be rolled into an open mortgage with a much higher interest rate.
The Consequences
- Limited negotiation power: You don’t have time to compare options or negotiate effectively.
- Stressful decisions: Rushed choices are rarely the best, especially with high-stakes financial products.
- Higher costs: You could end up with a less competitive rate or even face late penalties.
The Solution
Start early—ideally 4-6 months before your renewal date.
Some lenders allow you to renew or switch your mortgage as early as 120-180 days before the end of your current term without penalty. That gives you plenty of time to:
- Compare rates from other lenders
- Negotiate better terms
- Work with a mortgage broker for tailored advice
- Lock in a rate if you expect interest rates to rise
Set a calendar reminder or sign up for notifications from a mortgage professional so you don’t miss this critical window.
Bonus Tips: Make the Most of Your Mortgage Renewal
While avoiding mistakes is essential, taking proactive steps can maximize your renewal benefits. Here are a few bonus tips to help you come out ahead:
✅ Use a Mortgage Broker
Mortgage brokers have access to multiple lenders and can often secure better rates than you would get on your own. They also help navigate tricky situations like poor credit or self-employment.
✅ Lock In Rates Strategically
If interest rates are rising, consider locking in your new rate early. Many lenders allow you to hold a rate for up to 120 days, protecting you from sudden hikes.
✅ Consider Lump Sum Payments
If you have come into some extra money (bonus, inheritance, etc.), your renewal date is a great time to make a lump sum payment toward your principal. This reduces your balance and total interest paid.
✅ Consolidate High-Interest Debt
If you have outstanding credit card balances or personal loans, consider rolling them into your mortgage at renewal time. Mortgage rates are typically much lower, saving you hundreds in interest.
Final Thoughts: Take Control of Your Mortgage Renewal
Renewing your mortgage doesn’t have to be stressful or costly. You can turn it into a financial win by avoiding these three common mistakes: unquestioningly renewing with your lender, failing to reassess your needs, and procrastinating.
Take the time to evaluate your situation, compare your options, and negotiate wisely. Consider working with a mortgage broker who understands the Canadian market and can help you make informed choices tailored to your goals.
Your mortgage is likely the most significant financial obligation you will ever have. Treat your renewal with the attention it deserves—and you will be rewarded with peace of mind and potential savings. Contact us for more information.
Frequently Asked Questions (FAQs)
Q: When should I start thinking about my mortgage renewal?
A: Ideally, start the process 4–6 months before your current term ends. This gives you time to compare offers, negotiate, or switch lenders.
Q: Will my credit score be affected if I shop around for rates?
A: Not significantly. If multiple inquiries are made within a short time frame (typically 14–45 days), credit bureaus usually treat them as a single inquiry.
Q: Can I switch lenders during renewal without penalty?
A: Yes, if you are at the end of your mortgage term. However, switching lenders may involve some legal and administrative fees, so be sure to compare total costs.
Q: What if my financial situation changes (e.g., job loss, new debts)?
A: It is essential to reassess your needs and speak to a mortgage professional. You may still have options to renew, refinance, or consolidate debts.
