Mortgage renewal checklist: what to do before your term ends

Every time your mortgage term ends, you renew at the rates on offer that day. The letter your lender sends is a starting point, not the best deal, and a small difference in rate adds up over five years.

The short version: start four to six months early, ask for the lender's best rate, get outside quotes, and compare terms, not only the rate.

When to start

Begin four to six months before your renewal date. Many lenders will hold a rate for up to 120 days, so you can lock in a good offer early. If rates rise before your date, you keep the lower one, and if they fall, many lenders will let you take the lower one.

What to check first

• Your renewal date and current balance.
• Your remaining amortization.
• Your lender's current offer, and whether it is a posted or discounted rate.
• Your prepayment privileges and penalty method.

Shopping around

Ask a broker and one or two other lenders for competing quotes. Since late 2024, uninsured borrowers who move to another federally regulated lender at renewal generally do not need to pass the stress test again, as long as the loan amount and remaining amortization do not increase. This makes switching easier.

Moving costs little at renewal, as there is no penalty when your term has ended, though some lenders charge small legal or appraisal fees. Many lenders cover these costs when you switch.

Your options at renewal

• Renew with the same lender: the simplest, but ask for their best rate, not the letter's rate.
• Switch lenders: a possible rate saving, with paperwork.
• Change the term or type: fixed to variable, or a shorter or longer term.
• Change the amortization: shorten it to pay down faster, or extend it to lower payments (this may require qualification).
• Add or take equity: refinancing is a different process and may involve a penalty.

Example: the cost of a rate change

A $400,000 balance with 20 years left costs about $2,417 a month at 4%, $2,629 at 5% and $2,849 at 6%. A one-point difference in rate is about $210 a month, or $12,600 over five years.

Checklist

• Check your renewal date and your current balance.
• Ask your lender for its best renewal rate, not the posted one.
• Get at least two outside quotes.
• Compare fixed and variable, and the term length.
• Check the prepayment privileges and the penalty method.
• Decide whether to keep your amortization or shorten it.

Think about your plans

If you may sell in two years, a shorter term or a portable mortgage may suit you better. If your income has grown, consider a shorter amortization.

Plan ahead so that a rate increase does not come as a surprise.

Sources: OSFI: uninsured mortgage straight switches.