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What is Mortgage Renewal?
When you obtain a mortgage, it’s typically for a fixed period known as the mortgage term, which can range from several months to five years or more. At the end of this term, unless the mortgage is fully paid off, you must renew the mortgage—often multiple times over the life of the loan.
Mortgage Renewal Statements
If your mortgage is with a federally regulated financial institution (such as a bank), your lender is required to send you a renewal statement at least 21 days before your current term ends. If the lender decides not to renew your mortgage, they must also notify you within the same timeframe.
You will receive this statement either in paper format or electronically, depending on your communication preferences.
The renewal statement must include:
- The remaining principal balance on the renewal date
- The new interest rate
- The payment frequency
- The length of the new term
- Any applicable fees or charges
Importantly, the interest rate quoted in the renewal statement cannot be increased before your renewal date.
You may also receive a mortgage renewal agreement along with your renewal statement.
Assessing Your Mortgage Needs at Renewal
Renewal is an ideal opportunity to reassess your financial situation and determine whether your current mortgage still meets your needs. Consider the following:
- Can you afford to increase your payments to reduce interest costs and pay off your mortgage sooner?
- Would a different payment frequency work better for your budget?
- Do you plan to make lump-sum or additional payments?
- Are you satisfied with your current lender’s service?
- Would it be beneficial to consolidate higher-interest debts into your mortgage?
- Do you still require optional insurance (life, critical illness, disability, or employment)?
If you’re dealing with a federally regulated lender, they are required to recommend only suitable products and services based on your financial situation—and inform you if a product is not appropriate. Be sure to ask questions and clearly communicate your goals to ensure you’re choosing the best mortgage option.
Shopping Around for a Better Deal
You are not obligated to renew your mortgage with your current lender. You have the option to switch to another lender offering better rates or terms. Begin researching and comparing offers a few months before your term ends. Consult with other financial institutions and mortgage brokers to explore more competitive options—don’t wait until you receive your renewal notice.
Negotiating Your Interest Rate
Before renewing, try negotiating a better rate with your current lender. You may be eligible for a discounted interest rate lower than what is listed in your renewal letter. Present any competitive offers you’ve received from other lenders or brokers—having written proof will strengthen your position.
If you don’t take action, your mortgage may be automatically renewed, possibly at less favorable terms. Your renewal statement will indicate whether automatic renewal applies.
What is Mortgage Refinancing?
Refinancing involves replacing your current mortgage with a new one, often featuring different terms. This may occur at the end of your mortgage term or earlier, depending on your needs and your lender’s policies.
To determine eligibility, your lender will calculate your loan-to-value (LTV) ratio—the ratio of your outstanding mortgage and any secured debts to the current value of your home.
Using Home Equity Through Refinancing
Refinancing allows you to access equity you’ve built in your home, either through paying down your mortgage or from an increase in your property’s value. You can borrow up to 80% of your home’s appraised value, less any outstanding mortgage balance.
This equity can be used for a variety of purposes, including:
- Home renovations
- Debt consolidation
- Education expenses
- Major purchases
Reducing Your Monthly Payments
Refinancing also gives you the chance to restructure your mortgage to better suit your financial circumstances. You may be able to secure a lower interest rate or extend your amortization period, both of which can result in lower monthly payments.
