Critical Steps For Renewing Your Mortgage

Understanding the Mortgage Renewal Landscape

Navigating the complexities of mortgage renewals can feel like a daunting task for many Toronto homeowners. With your mortgage term drawing to a close, the decisions you make now can have long-lasting implications on your financial health. The renewal process isn’t just a formality; it’s an opportunity to rethink your finances for the next several years. 

Ideally, you should start your research approximately 4-6 months before your term ends. Your lender will send a renewal offer about 30 to 120 days before your current term expires, but that’s just a starting point. Evaluate this offer, compare it with current market rates, speak with a mortgage broker, and don’t hesitate to negotiate with your financial institution if their offer is not comparable to the rest of the market rates available.

Understanding the current market is pivotal. Rates fluctuate, and being informed can give you the leverage you need to negotiate better terms. Your lender’s first offer may not be their final offer. It is quite common that lenders will offer you a higher rate at first.  The majority of people will simply accept it, especially if they leave this to the last minute. Loyalty doesn’t always pay in the mortgage industry. Sometimes, the best deal is with a different lender. Unless you are refinancing, there is no cost to switching or transferring your mortgage to another lender.

Another point to consider is how changes in your life could impact your mortgage needs. Job changes, family expansion, or changes in financial goals should all play into your renewal decision.

3 Most Common Questions about Mortgage Renewals

Will My Mortgage Automatically Renew in Ontario?

Yes and no. While some mortgages may automatically renew at the end of the term, this usually comes with the bank’s standard terms, which might not be in your best interest. It’s akin to leaving money on the table. Automatic renewals often come with higher rates than could have been negotiated. Your lender may also have the right to lock you into a term at a high rate.  If that happens then you will face a penalty if you break it before the expiry of the term.  In most cases, your mortgage will roll over into an “Open” mortgage.  An “Open” mortgage can be paid out at any time without penalty.  The interest rates are significantly higher than a “Closed” term mortgage which is what you will likely want to negotiate. 

If you are in a variable rate mortgage, then in some cases your mortgage will not automatically renew.  If that happens, and you are unaware, the lender may stop automatically taking payments which will put you in default.  A default from missed payments can have terrible consequences including the lender taking foreclosure proceedings. Staying proactive is key; don’t wait for your lender to come to you with an offer. 

Can You Be Turned Down for a Mortgage Renewal?

While uncommon, it’s possible to face denial during a mortgage renewal, particularly if there have been significant changes in your financial situation or if you’ve missed payments. The best defense is a good offense: maintain a solid payment record and engage with a mortgage broker early to explore your options.

What Happens When Your Mortgage Term Ends?

If you do nothing until your term ends then you are at a crossroads. You can either renew with your current lender or switch to a new one for better terms. Keep in mind that a new lender, even through a broker, can not just switch your mortgage over immediately.  This takes a minimum of 3 weeks in most cases.  That is 3 weeks from the point of having received all of your documentation (signed) and they have completed an appraisal if it was necessary. If you don’t take action, your mortgage might automatically renew under terms that might not be favorable. If you catch this late you can request that your mortgage be renewed into an “Open” product while you assess your options.  Although the rate is higher it will be only temporary if you are switching your mortgage elsewhere or if you are negotiating with your current lender and just need more time. Use this as a chance to reassess your financial goals and potentially secure a better rate.

Mortgage renewals offer more than just a continuation of your loan; they offer a chance to recalibrate your financial strategy. With the right guidance and expertise, you can navigate this process to your utmost benefit. Take the first step towards optimizing your mortgage by reaching out to a qualified mortgage professional. Don’t settle for less than your financial future deserves.

Feel free to reach out to us with any questions or concerns by sending a direct message or calling Michael Marini at 416.549.1676. Together, we can turn your mortgage renewal into an opportunity for growth and stability.

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