Kurt Woock
Beth Buczynski
When renewing a mortgage in B.C., it’s easy to focus solely on finding the lowest rate. Low rates are a huge factor, but mortgage renewal is also a chance to review all the terms of a new mortgage in order to best support your needs and goals.
What is a mortgage renewal?
Mortgages in Canada have two major time components: amortization and term.
Amortization: the length of time it takes to pay off the entire mortgage balance. For new homeowners, an amortization of 25 or more is typical.
Term: the duration of your existing contract. Most Canadian homeowners sign up for five-year terms, though it’s possible to get both longer and shorter terms.
When your mortgage’s term is up, you’ll need to renew it unless you’ve completely paid it off. You can renew with your current lender or move to a new lender. Either way, you’re entering into a new contract.
The best way to get the lowest rate available to you at renewal is to negotiate. Negotiating may sound intimidating, conjuring up images of tense discussions around a conference room table of bankers.
It’s not that stressful.
In reality, renewing often means contacting a mortgage broker who can quickly compare offers from many different lenders, or working directly with a few different lenders to see what rates they can offer you.
Shopping around doesn’t affect the renewal offer from your current lender — in fact, it could result in a counter-offer that saves you money.
What to expect at the beginning of the mortgage renewal process in B.C.
Toward the end of your current mortgage’s term, your lender will send you a renewal offer. If you do nothing, that renewal offer automatically goes into effect.
That initial offer is unlikely to be the best mortgage rate you can get in B.C. Other lenders eager to earn your business may have special offers lower than what your current lender offered. Remember: You only need one other lender to make a better offer.
Follow these steps when renewing a mortgage
- Set a calendar reminder. Don’t end up with a higher rate just because you ran out of time. Commit to starting your search two or three months before your current mortgage runs out.
- Think beyond rates. Getting a low rate is a priority, but not the only priority when getting a mortgage. You’ll also want to consider things such as the term length that works best for your situation and whether an open mortgage or closed mortgage is ideal for you. Knowing what you want will clarify what you’re asking for from lenders. A mortgage professional, such as a mortgage broker, can help if you’re unsure how to proceed.
- Shop around. Contact a few lenders directly or use a mortgage broker to find the best mortgage for your needs.
- Consider your renewal offer. Do you like your current lender? If you get a more competitive offer elsewhere, ask your current lender if they can beat it.
- Make a decision. If switching lenders, you’ll need to formally apply for the mortgage.
- Review the mortgage documents and sign them. Or, if necessary, provide a lawyer with the details they need to complete the transaction.
If you decide to renew with your current lender, the process is often more streamlined, as all it will likely require is for you to review your options and then accept the new agreement.
See today’s best renewal rates
Browse rates from Canada’s top lenders and brokerages.
Consider this before renewing your mortgage
Renewing your B.C. mortgage is easier than getting a mortgage to buy a home, but it still requires careful consideration. Consider the following:
- Your budget. If you’ve built up some savings, you might want to pay down your remaining balance to save on interest and reduce the time it takes to repay your mortgage.
- Mortgage term. The longer your term is, the more likely that interest rates will change by the time you’re up for renewal again. Whether that’s a pro or a con is up to you.
- Mortgage type. At renewal, you can re-evaluate your need for a variable or fixed-rate mortgage. Variable-rates may be lower, but they can fluctuate over your term. Fixed mortgage rates remain the same for the entire term.
- Payment frequency. When renewing your mortgage, you can choose your payment frequency, for example, monthly, bi-weekly or weekly.
- Debt consolidation. If you have any outstanding high-interest debt, you could renew into a larger mortgage and use the extra cash to pay off your debt.
What to expect when renewing your mortgage with a different lender
Mortgage shopping can be done on your own, or you could get a mortgage broker to do the work for you. If you decide to switch lenders, you’ll need to go through the entire application process since you’re a new borrower. That means you’ll need to provide your personal information, proof of employment and financial records. You’ll also need to pass the mortgage stress test before approval. Accepting the renewal offer from your current lender doesn’t require you to pass a stress test, which can be a bonus if your income or credit score has dropped.
How to get the best mortgage renewal rates in B.C.
Getting the best mortgage renewal rates in B.C. is not a complicated process as long as you consider some of the following tips:
- Don’t accept the first offer. When your mortgage renewal letter arrives, contact your lender to see if they can do better.
- Shop around. About four months before your mortgage term ends, check with other lenders to see what rates they’re offering. You’ll be in a much better position to negotiate with your current lender if you have a competitor’s offer in hand.
- Use a mortgage broker. Enlisting the services of a mortgage broker can help because they’ll shop around on your behalf — usually at no cost to you — and present you with the best offer.
Think about more than just the rate. The best interest rates typically give you limited options. Select a mortgage that aligns with your financial goals and offers the features you want.
For example, one Reddit user posted in r/PersonalFinanceCanada that they were leaning toward a 5-year term instead of the increasingly popular three-year term.[1] A three-year term gives the option to renew sooner — potentially lucrative in a falling-rate environment — but the five-year rate typically has a lower rate today. The reason: In addition to securing a mortgage, the person who wrote the post said they wanted to fund their TFSA, and the five-year would free up more cash for predictable savings.
Frequently asked questions about renewing a mortgage in B.C.
It is possible to renew your mortgage without an income if you stick with your current lender because mortgage providers typically won’t require proof of employment on renewals.
An early renewal on a mortgage may be worth it if you’re offered a lower interest rate that will save you more over the long run, or if you’re looking to consolidate high-interest debt.
If you have a mortgage with a federally regulated institution, your mortgage lender must send you a mortgage renewal statement. Sometimes called a mortgage renewal letter, it’s often sent a few months before — or at least 21 days before — the end of your current term.
The statement should contain the following information:
- The amount owing at your renewal date.
- The new interest rate offered.
- The new payment terms.
- The length of the mortgage term you’ll be agreeing to.
- Any fees or charges.
To be clear, you don’t need to accept these terms immediately. You can shop around for a better rate with a new lender or negotiate more favourable terms with your current lender, just be mindful of your contract end date.
Article Sources
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Reddit, “MEGA Thread – Mortgage Rates Thread,” accessed September 6, 2024.
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