Mortgage Renewal

A mortgage renewal is when you simply renew the same mortgage with your current lender without making any changes to the amount or amortization period (maturity date).

A mortgage refinance is when you either take your mortgage to another lender, or if you refinance it with your current lender at a different amount and/or different amortization period.

Even if you take your current mortgage to a different lender, you have the option to keep the same mortgage amount with the same amortization period or change one or both of those factors. The first step is to determine whether or not you were satisfied with your current mortgage term.

Getting started on your mortgage renewal early will also give you time to analyze your own finances and decide whether you want to switch your terms or switch to a different lender altogether. Depending on the way your life has changed during your previous term, you might be looking for different mortgage options to better suit your current financial situation. A mortgage renewal gives you the chance to renegotiate the terms of your agreement and adjust your mortgage according to your financial needs. Before your term matures, your mortgage lender will most likely send a renewal offer in the mail outlining the interest rate they are offering and the term. You can show this letter to Clover Mortgage and have our agents hunt for a better rate and lock it in for 120 days.

Before you decide on a lender, it may be a good idea to shop around and consider different options. Look for lenders that offer the type of loan you need and compare their rates, terms, and fees. Consider traditional banks, credit unions, alternative lenders, and other federally regulated financial institutions. Reach out to multiple lenders and ask for loan estimates. Provide them with basic information about your financial situation, such as income, debt history, and the amount you are hoping to borrow.

Compare the offers from different lenders, making special note of the interest rates, loan terms, fees, and any other relevant factors. Do not be afraid to ask questions about the terms, or to inquire about discounts and promotions.

One common concern amongst borrowers is whether or not shopping around for lenders will impact their credit score. When you apply for a loan, lenders usually perform a hard inquiry on your credit report, which can slightly lower your credit score. However, credit scoring models recognize that individuals might shop around for the best interest rates. As a result, multiple inquiries within a specific timeframe (usually 14-45 days, depending on the credit scoring model) for the same type of loan are grouped together and counted as a single inquiry. This minimizes the impact on your credit score.

Working with Clover Mortgage can be an easy way to cut down on the number of hard inquiries you perform, and minimize the impact on your credit score. Our trusted brokers are well-versed with our vast network of 60+ lenders, and thus, may be able to give you rough estimates of each lender’s offer and provide mortgage renewal tips. In doing so, we can help you narrow down your pool of lenders before any hard inquiries are made, saving your credit score in the process. Contact us to get started today.

Getting approved for a residential mortgage or refinance in Canada has become increasingly difficult over the past few years and Canadians need a new and more pleasant solution for their property financing needs. That’s where we come in. Here at Clover Mortgage, we have the experience and knowledge to help make it easy to renew your mortgage, or to get approved for a mortgage at great competitive rates—even if the big banks turn you away.

We aim to offer you the most innovative and competitive customized mortgage solutions that fit your needs and individual situation, all while helping you save money. By employing experienced mortgage brokers and mortgage underwriters, while providing industry-leading training to new mortgage agents, we are able to provide trustworthy and reliable advice and service, while offering some of the best rates and lowest pricing in the country!

We furthermore are well equipped to help you compare your renewal and refinancing options. We actively work with a network of over 60 lenders and 150+ mortgage products, and can help you compare and contrast terms, rates, and approval conditions, in order to find the best match for you and your finances. Navigating the Canadian housing market is hard, but it doesn’t have to be. Contact us today to schedule a free consultation.

Let’s take the following scenarios as an examples of how a mortgage process can work in different situations.

Scenario # 1

In the first situation, we have a borrower homeowner, Mr. Walters, who had been saving a fair portion of his income every month since originally buying his home 5 years ago. He now has $100,000 in his savings account at his bank. Now that his initial 5-year fixed rate mortgage term is coming up for renewal, Mr. Walters would like to pay down the remaining principal of his mortgage by $100,000. Since it is renewal time, Mr. Walters will not encounter any mortgage prepayment penalties for paying early. Instead, he will simply pay the $100,000 to his bank and renew a mortgage for the remaining balance.

To illustrate this in a mathematical way, let’s say that his original mortgage principal was $800,000 and at the end of his 5-year term he has paid it down by $60,000 through his regular monthly mortgage payments. Here’s how the formula will work:

$800,000 - $60,000 = $740,000

This means that he now has only $740,000 remaining at renewal time. Now let’s see what it looks like once he puts the additional $100,000 he saved up towards the remaining mortgage balance.

$740,000 - $100,000 = $640,000

He will now only have a remaining balance of $640,000 that he will need to renew for. He has the option at this point to renew his mortgage at the newly negotiated rate for a principal balance of $640,000, or he can refinance his mortgage with a different lender, or even the same lender who will consider the newly reduce loan to value (LTV) which might provide Mr. Walters with an opportunity to get an even lower mortgage rate for his newly renewed or refinanced mortgage.

Scenario #2

In this scenario, Mrs. Anderson wishes to sell her property 2-years into a portable fixed 5-year fixed mortgage term, 3-years prior to her renewal date, in order to purchase a new property. She will be using the proceeds of the sale of current home as a down payment on her new property. If she were to break he mortgage with 3 rears remaining, Mrs. Anderson would have to pay a penalty. Since this is a fixed rate mortgage, the pre-payment penalty would likely be the equivalent of the greater of either interest rate differential (IRD) or 3 months of interest payments. This can amount to a hefty amount.

Since Mrs. Anderson’s current mortgage is portable, if she were to requalify based on today’s stress test policy, she would be able to port her existing mortgage to the new property and continue on until renewal without any penalty.

Scenario #3

Mr. Johnson purchased a home 1 year ago and took out a private mortgage for a 1 year term. His private mortgage is coming up for renewal and his current private lender is requesting some updated documentation.

If this was not a private mortgage and was a mortgage with either a bank, a trust company, credit union, or other AAA or Alternative lending institution, the process would be simpler. Either the borrower would renew directly with the lender with minimal costs and fees, or they would work with their mortgage broker to help them negotiate the most favourable renewal rate and terms.

Since they are renewing a mortgage, they will likely need to provide their lender with an updated appraisal report, updated home and fire insurance policy, updated property tax bill showing that their property taxes are all paid and up to date. Provided that these are all to the satisfaction of the lender, the borrower would then either be required to pay a renewal fee, or if there is enough remaining equity in the home, the lender might be willing to add the renewal fee to the outstanding principal balance of the mortgage.

Once all of this has been determined, the borrower would need to refer to a lawyer to close the transaction. As the renewal process with a private lender tends to be usually more involved than a traditional mortgage renewal options from a traditional lender, the borrower might be better served working with their mortgage broker or mortgage agent to help make this process as smooth as possible, and to help ensure they are getting the best rate and terms that are available to them at that time.