3 Common Myths About Mortgage Renewals

Falling for These Mortgage Renewal Myths Will Cost You

You've probably heard at least one of these common misconceptions. Don't fall for it! A little bit of effort can result in big savings when it's time to renew.

Homeowners who started a five-year mortgage four years ago probably are eyeing 2025 warily. Rates were below 4% and dropping in the second half of 2020. Today, they’re more than 50% higher.

About half of fixed-rate mortgage holders who are on track to renew in the next two years expect to cut back on daily expenses, according to a CIBC poll released in April 2024. Yet only one in three plan to shop for rates. The two out of three who aren’t should reconsider.

Assuming that there’s little to gain by shopping for better rates is just one mortgage renewal misconception that can cost homeowners money, anxiety or both.

Myth #1: Every lender offers essentially the same rate

Your financial profile is the same on every mortgage application, so you should expect the same offer from every lender, right? Think again.

“The rate variance between lenders can be significant,” says Clinton Wilkins, founder of Clinton Wilkins Mortgage Team in Halifax. People who accept their lender’s initial renewal offer without looking into any other options are probably leaving money on the table. “Typically all lenders offer clients that are coming up for renewal even higher rates than what new customers are getting,” he says.

You aren’t obligated to renew elsewhere just because you start looking. “The worst case scenario is you need to renew with your existing lender,” Wilkins says. If you were considering doing that anyway, that’s not much of a risk.

Sometimes it does make sense to stick with your initial offer. For example, a drop in credit score may make sticking with a current lender more attractive because you can avoid going through another approval process.

“But I would say, for the majority of the clients that we see, there is a cost savings [to switching lenders],” Wilkins says

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Myth #2: You’ll pay high fees to switch to a new lender

Some homeowners may fear that a lower monthly payment could come only at the cost of paying a lot in fees upfront.

“I think the average consumer should assume there’s going to be no fees when their mortgage renewal comes up, even if they’re changing lenders,” Wilkins says.

Some of the fees you pay when you get your first mortgage, like registration fees and title insurance, aren’t part of renewals. Any fees that do apply are often paid by the new lender — the price to acquire your business.

There are a few circumstances where homeowners might pay fees, however. Wilkins says renewing with an alt or private lender can cost anywhere from a few hundred to thousands of dollars, even if you are renewing with the same alt lender. Fees in these cases typically aren’t waived.

If you have a collateral charge, such as a home equity line of credit or some other loan secured against your home, renewing with a new lender could be complicated and come with fees. A mortgage broker can help you navigate your options, and lenders could waive those fees to earn your business.

If you shop without help from a mortgage broker, be skeptical if fees show up on an offer, regardless of the type of mortgage you need.

Request that fees be waived, and ask if the lender is offering any promotions. Your request may be only partially met. It may be denied. But it’s worth asking. Remember that, while your goal is to find a mortgage that fits your needs, a lender’s goal is to earn your business.

Myth #3: Looking for a better rate requires a lot of time

Shopping for a home can feel like having a second job — checking listings throughout the day, squeezing in showings, constantly weighing options and making tough decisions.

It’s easy to see why thinking shopping for a mortgage could be equally all-consuming.

“I think the misconception is that clients think that it’s a lot of work,” Wilkins says. He tells his clients to expect to spend about five hours if they end up switching lenders.

Contacting lenders yourself would likely be more time consuming than working with a mortgage broker, who has quick access to a wide range of lenders.

Whichever route you choose, don’t doubt the value of shopping around at renewal time. Economic factors have led to higher rates across the board; don’t make it worse by settling for anything other than the best rate you can possibly get.

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