When it comes to mortgage renewals, if you do not take action your mortgage will in many cases either renew automatically or become in default. When your mortgage term approaches the end, your mortgage lender will typically offer you renewal terms that you may choose to accept, negotiate, or decline. Provided you continue to make your monthly mortgage payments on time, lenders will rarely not extend to you an offer to renew your mortgage, although this can happen without cause depending on your mortgage commitment and contract.
Depending on the type of mortgage lender you go with, you may be able to do a straight renewal without incurring any additional costs. This is the typical mortgage renewal scenario when renewing your mortgage through a bank. If you took out your mortgage through a private lender or an alternative institutional lender such as a trust company, you may be required to pay a renewal fee.
What does it mean when your mortgage is up for renewal?
When faced with a mortgage renewal, this simply means that your current contracted mortgage term is approaching its expiration date. You see, the majority of mortgages in Toronto and in general mortgages in Ontario are contracted for a finite period of time that is referred to as the “mortgage term”. This period tends to range from as little as a few months to as long as 10 years in Canada.
How can my mortgage renew automatically?
In order for your mortgage to renew automatically a few things need to occur. Firstly, your lender needs to be willing to renew your mortgage. Secondly, you would either respond to your renewal notification accepting the terms and conditions of the new mortgage, or you would simply not do anything and your lender may be in a position to automatically renew your mortgage for another term based on the conditions stipulated in your original mortgage agreement.
How soon can you renew your mortgage in Canada?
When renewing your mortgage in Canada, some lenders may allow you to renew your mortgage as early as 6 months prior to your current mortgage term expiring.
You can either proactively reach out to your lender several months prior to your renewal date to find out, but if you don’t, your lender must notify you in advance of the renewal date what your options are. If your mortgage does happen to be with a federally regulated bank, then they are obligated to send you an official renewal statement with no less than 21 days remaining on your current mortgage term. Also, if your lender chooses not to renew your mortgage then they must notify you in advance and provide you with enough time to refinance your mortgage elsewhere or to pay it off.
What are the pros and cons of an automatic mortgage renewal?
Like with most mortgage related topics, the answer to whether renewing your mortgage automatically is the right decision for you or not depends on the specifics of your current financial situation and future financial goals.
While there are definitely advantages to an automatic mortgage renewal, it is important to understand the potential drawbacks also. Our recommendation is to educate yourself about the mortgage renewal process.
The advantages of having my mortgage renew automatically?
Save money by avoiding additional new broker and lender fees
If you are happy with your current mortgage lender and the renewal terms that they present to you, then allowing your mortgage to renew automatically can save you time and money. If you are in a private mortgage, often times the renewal fee is significantly lower than the broker and lender fee that you might need to pay when seeking to switch your mortgage to another private lender. This may not be the case if you need to refinance and take out additional equity from your home, or if you can now qualify for a better mortgage rate with a better lender such as a trust company, credit union, or even a bank.
Save time by allowing your mortgage to renew automatically
When it comes to a renewing a bank mortgage, if the new mortgage interest rates and terms are acceptable to you, then you might choose to forgo having to go through the whole mortgage application process again and just stay with what you have.
You don’t need to requalify at the current stress test
By renewing your mortgage automatically, you will not have to requalify for the newly renewed mortgage. By avoiding the need to requalify, you won’t be subjected to the newly increased mortgage stress test.
The disadvantages of having my mortgage renew automatically?
You might be overpaying
If you do not review your mortgage renewal offer carefully, and if you choose not to explore other options, then you may end up getting stuck in a mortgage that carries a higher interest rate and unnecessary renewal fees that you may have been able to avoid. If you take your mortgage renewal offer to a professional and knowledgeable mortgage broker, then the broker will analyze your current financial and credit situation and try to find a better mortgage option for you. If they fail to find a better alternative, then you can always renew with your current lender. However, in many cases a good mortgage broker will have access to a plethora of lenders and will more often than not be able to find you an even better offer someplace else.
It’s important to take into account various things to consider when your mortgage comes up for renewal.
You might be missing out on an opportunity to consolidate other debts
If you have high-interest credit card debt, car financing, student loans, and high interest credit lines, you might be able to save hundreds and even thousands of dollars a month by consolidating your high interest debt into a low interest mortgage. By tapping into additional home equity that may have become available to you over the years, you can roll up and consolidate your debt into one lower monthly payment. Imagine what you might be able to do with the additional cashflow.
You might miss an opportunity to pay down your mortgage faster
If you were able to either save up extra money or came into a lump sum of money during your original mortgage term, by allowing your mortgage to renew automatically, you might be missing out on the chance to make a lump sum payment towards your principal mortgage balance. By paying down your principal mortgage balance, you may have an opportunity to drastically lower your monthly payments, and in some cases either qualify with a better lender or qualify for a lower interest rate on your mortgage.
You may not have the chance to switch your rate type – fixed vs variable
When reviewing a new mortgage term, depending on what’s happening in the economy, you might be better off switching from a variable rate mortgage to a fixed rate mortgage renewal, or vice-versa. In the case of an automatic mortgage renewal, that option might not be available to you.
Here’s a table showcasing some of the various pros and cons to allowing your mortgage to renew automatically.
| Pros |
Cons |
| Tends to be quicker than qualifying for a new mortgage from a different lender |
You might miss out on lower interest rates |
| Can be cheaper by avoiding unnecessary fees associated with switching lenders |
You may be losing out on lower monthly mortgage payments |
| Skip the mortgage stress test |
You might be able to take out additional equity by refinancing or switching to a new lender |
| No lengthy mortgage applications |
You could be able to consolidate debt with a newly refinanced mortgage amount instead of renewing your existing mortgage |
|
You can get stuck with worse mortgage terms |
|
You don’t know what you don’t know, so inform yourself of your options |
What happens if you can’t renew your mortgage?
Provide that you keep up with your monthly payments and maintain your credit in good order, you should not have any trouble renewing your mortgage in many cases. It is important to note however, that lenders do have the right to refuse a borrower the opportunity to renew their mortgage.
In the event that you are not offered a mortgage renewal, then you would have to either payoff the entire mortgage principal in cash, sell your home to pay it off, or refinance with another mortgage lender.
In either case, you should start exploring your options early in the event that you either get denied a mortgage renewal, or in the event that you could qualify for a better mortgage product more suitable for your needs.
If you fear that you may not be given the chance to renew your current mortgage, or if you simply want to know if you can qualify for a better rate or higher mortgage amount, call Clover Mortgage at 416-674-6222 or email us at info@clovermortgage.ca to speak with a knowledgeable and experienced mortgage broker. Our brokers are standing by to help you learn and understand your options, and ensure that you get the right mortgage that best suits your needs and individual financial situation.
What can I do to ensure I get the best mortgage terms when my mortgage comes up for renewal?
In order to ensure that you stay on top of your mortgage and get ahead of the renewal time, we recommend you set a reminder in your calendar and/or phone. This way you can leave yourself enough time to explore your other options and enough time to apply for a potential better mortgage option with another mortgage lender. It’s always a good idea to start shopping around 3 or 4 months before your mortgage renewal date.
At the end of the day, provided that your lender is willing to renew your mortgage, the choice is yours as to whether you wish to renew your mortgage with your current lender or to refinance or switch lenders altogether. In order to ensure that you make the right choice, be sure to do your research and due diligence, and ask a professional mortgage broker for help should you have any questions or concerns. A reputable broker will have access to the right lenders and information to help ensure that you are making the right decision when it comes to your mortgage renewal.
