Mortgage Refinance

Steps to Renew your Mortgage.

Renew your Mortgage

Renewal Statement:

The renewal statement is issued by your financial institution at least 21 days before the end of existing term. Information on the statement includes,Balance outstanding, Interest Rate, Payment Frequency, Term and any charges or fees that may apply. It specifies that until the date of renewal the interest rate offered will not increase. If the lender doesn’t wish to renew, you will be notified at least 21 days before the renewal date.  

Review your mortgage needs:

Two options at renewal are either to renew your mortgage or pay it off. This would be the a good time to review your needs.  

Points to consider:

  • Does your budget allow you to increase mortgage payments.
  • Do you want to pay off mortgage sooner and save interest by making additional prepayments.
  • Is there a need to change payment frequency. Biweekly accelerated payments can help you pay mortgage quickly.
  • Are you satisfied with your current lender.
  • Is there a need to consolidate the debts with higher interest rates. Does it make sense to increase mortgage payment.
  • Are you satisfied with the insurances in place like critical illness, disability, employment or mortgage balance protection.  

Find a Mortgage Broker:  

You don’t have to renew with the same lender. You can choose to renew with another lender that offers you terms and conditions that best suit your needs. No need to wait until you receive renewal letter. Contact your mortgage broker for advise and suitable mortgage.   If you do not take timely action, chances are your mortgage may automatically get renewed for another term. You may not get the best rate and conditions.   Keep in mind while switching to another lender for the same amount, the new lender will qualify you for mortgage. New lender may have a different criteria for mortgage approval. Talk to an expert who is well aware of lenders. You may have to pass stress test. There are alternate lenders that are more relaxed and offer competitive rates.   If you do not have mortgage default insurance the lenders use higher interest rate of Bank of Canada’s bench mark rate or contract rate plus two percent to qualify you. if the mortgage is renewed with existing lender, the lender is not required to use stress test, although may choose to do so.  

Costs to change Lenders:

  • Fees for discharge previous mortgage.
  • Fees for registering new mortgage.
  • Transfer or assignment fee in case of switch
  • Appraisal fee.
  • Legal fees.
  • Mortgage insurance fee applicable(If the amount of loan is increased, or taking extended amortization). Some lenders may absorb a portion of the fees.  Always advise your broker if you have taken insurance to avoid paying insurance twice.  

Collateral charge:

What if your existing mortgage is registered with collateral charge. You will have to pay fees to remove the charge and register the new mortgage with new lender. To remove the charge full amount must be paid to the lender for the collateral such as line of credit.   If you change lender before the end of the term you may also incur prepayment penalties. Consult with Mortgage Broker and know your options before taking any action.