Mortgage Renewal: Simplify Your Process & Save Money

Renewing a mortgage can be a complex process, especially with recent hikes in interest rates. Many Canadians are facing the reality of higher monthly payments as their mortgage renewal deadlines approach. Whether it’s your first or last renewal, the process follows a familiar path: comparing rates and carefully reviewing the terms.

According tothe Bank of Canada “More than 4 million mortgages—or about 60% of all outstanding mortgages—will renew over the next two years. A big portion of these have not renewed since interest rates started rising in 2022”

If you are renewing in 2025 or 2026, you aren’t alone. Many Canadians renewed their mortgages when rates were low. It’s very unlikely that mortage rates will be as low as they were in 2022, but they are coming down are expected to continue to drop through 2025.

Will Rates Drop in 2025?

Mortgage rates have dropped significantly in 2024, and experts suggest suggest more drops in 2025. Fixed rates may follow bond yield trends, while variable rates could see modest declines mid-year. Brokers are expecting Fixed rates to come down to the high threes in 2025, following bond yields.

Tips for Mortgage Renewal

1. Start Early and use a Broker to Shop Around For You

Don’t wait until the last minute to prepare for a renewal. Begin exploring your options months before your contract ends.

• Contact your current lender to understand their renewal offer.
• Compare offerings from other lenders to find the best rates and terms.
• Evaluate fixed-rate versus variable-rate options based on your financial goals.
• If you need a b lender, mention this to use when you reach out.

Mortgage brokers originated 40% of mortgages in Canada and the number is growing. The big banks Like TD mortgages are struggling to remain competitive in the residential mortgage industry, which is causing Canadians to use a broker to find more competitive rates.

2. Consider More Than Just the Renewal Mortgage Rate

While securing a low rate is important, don’t overlook other factors that could save or cost you money.

• Life Changes: Anticipate future needs, like a job change, a move, or expanding your family.
• Flexibility: If you might sell your home before your term ends, consider flexible options like variable rates, shorter terms, or mortgages with portability.
• Fees: Avoid high penalties by aligning your mortgage with your future plans. Consulting an independent mortgage broker, like Unrate, can help uncover flexible options tailored to your needs.

3. Mortgage Renewal Amortization Period

If rising costs strain your budget, extending your renewal amortization period can reduce monthly payments. However, this comes at the expense of higher long-term interest costs. Use this approach strategically as a short-term fix while keeping your financial goals in sight.

4. Mortgage Renewals No Longer Require a Stress Test

Canada’s banking regulator is making it easier for homeowners to change lenders during mortgage renewals by removing the requirement to reapply the stress test.

The Office of the Superintendent of Financial Institutions (OSFI) announced that lenders no longer need to apply the minimum qualifying rate, known as the mortgage stress test, for straightforward switches of uninsured mortgages at renewal.

A straightforward switch allows homeowners to transfer their mortgage to a new lender at the end of the term while keeping the same loan amount and amortization schedule. Essentially, the mortgage terms remain unchanged, but the lender is different.

What You Need to Know About Mortgage Renewals

How Renewals Work

Most mortgages in Canada are for fixed terms (typically 1–5 years) within an amortization period. At the end of a term, you either repay the balance or negotiate a new contract. This process is called a mortgage renewal.

Renewal Notifications

Lenders usually send renewal letters detailing your current balance, interest rate, and new terms. While automatic renewal is an option, it may not offer the best rates or terms. Shopping around is key to avoiding higher costs.

Extended Renewal Notice Period

Proposed updates to the Canadian Mortgage Charter would require lenders to notify borrowers of renewal terms 4–6 months before the contract ends. This extended period allows more time to explore better options.

What If Your Renewal Is Denied?

While rare, a lender may deny a renewal due to financial issues like job loss or missed payments. If this happens:

1. Negotiate with your lender, but expect higher rates or adjusted terms.
2. Consider switching to a different lender or an alternative option.
3. Work with a mortgage broker who can connect you with competitive options outside of traditional banks.

Early Renewal: Is It Worth It?

Renewing early can be beneficial if rates are expected to rise. However, consider:

• The penalty for breaking your current contract.
• The renewal rate offered.
• Whether the terms align with your financial needs.

Refinancing vs. Renewing

Renewing extends your existing loan, while refinancing involves creating a new loan that includes additional funds from your home’s equity. Refinancing may be a better option if you need extra cash for renovations or other expenses.

While predicting future mortgage rates is challenging, stable or lower rates are expected in 2025. Use this renewal as an opportunity to reassess your financial goals, compare offers, and secure a deal that aligns with your needs.

By approaching a mortgage renewal as carefully as you would a first-time mortgage, you can minimize costs and maximize flexibility for the years ahead.