Mortgage Renewals

Term	Type	Rate
1 Year	Fixed Closed	6.59%
2 Year	Fixed Closed	5.94%
3 Year	Fixed Closed	4.94%
4 Year	Fixed Closed	5.09%
5 Year	Fixed Closed	4.84%
Secured Line of Credit	Open	Prime + .50%
5 Year (Prime 7.20% less 1.10%) Variable	Closed	6.10%

Consider this: according to a report, Canadians took out almost $18 billion of new mortgage debt in April 2021. It was the fastest monthly increase on record and enough to bring total housing debt to nearly $2 trillion.

If you took out a mortgage, it is everyone’s hope to complete your mortgage payments before the term ends to avoid mortgage debt. But quite often this isn’t possible even while taking advantage of prepayment privileges. Instead, the common scenario is the term ends and the borrower has a balance owing therefore needing to renew the mortgage.

However, you shouldn’t just jump into renewing your mortgage. You need to study the mortgage renewal options and factors that affect the repayment. Pay attention to the interest rate, lender, the duration of the new mortgage term, and how often you have to make payments.

You should only consider renewing your mortgage after carefully assessing these factors. This article covers all you need to know about mortgage renewals.

What Is a Mortage Renewal?

Mortgage renewal is the option a borrower has at the end of their mortgage term to renegotiate the conditions of their contract. It is only available to borrowers who have not and cannot repay the remainder of their mortgage balance after the term ends.

Generally, a mortgage term can run for months or years. The mortgage contract is in effect during this time, and you must meet its terms and conditions. If you do, you can renew the mortgage with the same lender.

If you renew with the same financial institution, they will send you a contract to sign and return. However, you can choose a different lender with less interest rate. But again, carefully consider your options before deciding.

Also, suppose you took out the mortgage with a federally regulated financial institution like a bank. In that case, they must send you a mortgage renewal statement letting you know whether they plan to renew or cancel your mortgage. The document must arrive at least 21 days before the end of your term.

The mortgage renewal statement contains the following information:

The balance of the mortgage
The interest rate (the bank will indicate whether the rate will increase or stay the same until the renewal date)
The term of the mortgage
The frequency of payment
The applicable fees

The renewal contract might accompany the statement. So if you stick with your current lender, you can sign the contract after reading the document.

What Happens When You Renew Your Mortgage With a New Lender?

As mentioned earlier, if the terms of the renewal contract from your current lender are unfavorable, you can decide to switch to a new one. Through mortgage brokers, there is many attractive mortgage products and incentives in which to transfer to. Many lenders will pay for the legals to close the mortgage, have an appraisal rebate program and most will cover the cost of title insurance and pay up to $250-300 in discharge fees. Ultimately, it is cheaper to switch lenders at the end of a mortgage term than to do so midway through the mortgage contract. If you wish to switch early than you will need to look at all advantages or disadvantages in doing so, the mortgage broker will help you to look at all possible solutions.

Why Do Lenders Deny Mortgage Renewals?

The most common reason why lenders fail to renew mortgages is payment default. If you consistently miss monthly payments, not only do you face a renewal rejection, the financial institution might foreclose on your property.

However, even if you never missed a payment, the lender might still decide to deny renewal. This would be the case where your credit reports and scores do not appear promising. Likewise, if you have a backlog of debts, the bank might choose not to extend the mortgage term because you might file for bankruptcy.

Also, if you have an unstable stream of income or you lost your job or switched to a low paying one, the lender can still reject a mortgage renewal. Summarily, your financial state must appear stable to increase your chances of getting your mortgage renewed.

Need Help With Your Mortgage Renewal? Professional Mortgage Brokers Can Help

Mortgage renewal may seem easy and direct, but there can be several hiccups. Therefore, contact a professional mortgage broker before commencing the mortgage renewal process. Our mortgage brokers act as the go between for the borrowers to the lenders to find the best option for them and interest rate.

We will access your credit report, verify your income, and coordinate all the necessary paperwork to get you the mortgage renewal. Our services also extend to first-time homebuyers looking to secure a mortgage. Contact us today to get more information.

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