Most homeowners in Ontario accept their lender’s initial mortgage renewal offer without negotiation. That’s like leaving money on the table.
Mortgage renewals can feel like just another form to sign, but they’re a chance to save thousands of dollars and reshape your financial path. But done right, they’re a chance to save thousands of dollars.
What is a Mortgage Renewal?
A mortgage renewal happens when the term of your existing mortgage ends. Instead of paying off the remaining balance, most homeowners choose to negotiate a new term with their lender.
In Ontario, mortgage terms typically last between one to five years. At least 21 days before your term ends, your lender will send a renewal statement. This document will include your remaining balance, interest rate, payment frequency, and the proposed term for renewal.
If you do nothing, your lender may automatically renew your mortgage. Convenient? Yes. But it often means accepting rates and terms that aren’t the most competitive.
Why Mortgage Renewals Matter
Mortgage renewals are not just a formality. Each renewal is an opportunity to adjust your financial plan. Your financial situation may have changed since you first took out your mortgage. Maybe you’ve received a raise, changed jobs, or faced unexpected expenses. By reevaluating your mortgage terms, you can ensure they still align with your financial goals.
Failing to negotiate your mortgage renewal could mean paying higher interest rates, adding years to your mortgage, or missing out on savings. On the other hand, making the right choices can lead to significant long-term financial benefits.
Mortgage Renewal vs. Refinancing
It’s easy to confuse renewal with refinancing. Here’s how they differ:
- Renewal: Extending your mortgage agreement when your term expires, often with new interest rates and terms.
- Refinancing: Breaking your current mortgage to negotiate a new one, typically to access home equity or secure a better rate. This may come with penalties or fees.
Renewals are routine, while refinancing is a strategic move. If you’re unsure which makes sense, speak to one of our mortgage advisors, who can help.
Steps to Renew Your Mortgage
- Review Your Renewal Statement: Start by carefully reading your lender’s offer. Don’t assume it’s your best option.
- Compare Rates: Check current mortgage renewal rates. Independent lenders or mortgage brokers often offer lower rates than major banks.
- Negotiate: Lenders want to keep your business. If you find a better rate elsewhere, ask your lender to match or beat it.
- Choose a Fixed or Variable Rate: Fixed rates offer stability, while variable rates can mean savings if interest rates drop. Which suits your financial goals?
- Consider Payment Changes: You should switch from monthly to bi-weekly payments to save on interest.
- Assess Your Financial Health: If your financial situation has improved, consider increasing your payments to pay off your mortgage faster.
Mortgage Renewal Tips
- Start Early: Begin exploring options 4 to 6 months before your term ends. Early birds often get the best rates.
- Know the Market: Stay informed about interest rate trends. As of March 2025, fixed and variable rates are around 3.9%.
- Polish Your Finances: Pay down debts and maintain a strong credit score to access better offers.
- Consider a Broker: Brokers can access deals from multiple lenders, making it easier to compare options.
- Ask About Perks: Some lenders offer incentives like cash-back options, no-fee transfers, or flexible payment schedules.
What Happens If Your Mortgage Renewal is Denied?
While most renewals go through without a hitch, lenders can deny renewal. Common reasons include:
- Missed mortgage payments
- Poor credit score
- Loss of income or job
- High debt-to-income ratio
- Decline in property value
What Can You Do?
- Talk to Your Lender: They may reconsider if you can explain temporary financial difficulties.
- Try Alternative Lenders: Private lenders and B lenders are often more flexible.
- Extend Your Amortization: Stretching your payments over a longer period lowers your monthly costs.
- Improve Your Finances: Address credit issues and reduce debt before applying elsewhere.
- Work with a Mortgage Broker: Brokers can find lenders specializing in situations like yours.
Can You Renew Your Mortgage Early?
Yes, early renewal is possible. Many lenders allow renewals up to 120 days before your term ends without penalty. This can be beneficial if interest rates are rising.
However, if you renew even earlier, expect prepayment penalties. The size of the penalty depends on your lender’s policies and how much time is left on your term.
Early renewals may also offer opportunities to negotiate a better deal, especially if you’ve consistently made on-time payments and improved your financial situation.
What Happens If You Don’t Renew Your Mortgage?
Ignoring your renewal isn’t an option. If your mortgage term expires without renewal, one of two things typically happens:
- Automatic Renewal: The lender may renew it under less favorable terms.
- Foreclosure Risk: If no renewal is processed, your mortgage enters default, leading to potential foreclosure.
Stay proactive. Mark your renewal date on your calendar and explore your options months in advance.
Can a Bank Deny Mortgage Renewal?
Yes, a bank can deny your mortgage renewal. However, banks usually prefer to keep existing clients, so denials are rare. Problems arise when financial situations change dramatically.
If your renewal is denied, explore options with other lenders. Alternative lenders often work with borrowers with credit challenges or unconventional income sources.
Conclusion: Take Control of Your Mortgage Renewal
Mortgage renewals are a pivotal moment in your financial journey. With preparation and negotiation, you can often secure better rates and terms.
Stay informed, compare options, and don’t be afraid to ask for a better deal. If the unexpected happens, alternative lenders and financial advisors can help you find a solution.
Make your mortgage work for you, not the other way around.
