Renew It or Lose It

What renewal?? Keep track of your term's end.

Not sure when your mortgage matures? It's a good idea to keep track — and if you have a complicated relationship with time (aka it flies too fast for your liking), your renewal may be upon you sooner than you think.

Don't rely on your lender to notify you with enough time for a renewal process that puts your needs and savings first. If your mortgage contract runs out, your lender will profit from the chaos.

You can find your mortgage renewal date on your original mortgage commitment or listed on your annual mortgage statement. It may also be available in your online lender account.

If you're unsure, call your bank rep for the exact date.

And while you're at it, ask them about the lender's renewal process to put you ahead of the details — especially if you're thinking of using an expert mortgage broker to shop around for a better deal.

What can complicate your mortgage renewal process?

The easiest renewal process would mean no changes to your current mortgage terms and early enough acceptance of a renewal offer with your lender (though be careful that you're not easily accepting a higher rate).

Your mortgage situation is unique. Your current needs or future goals may have changed. You may want to take out home equity as cash, save more over your next term, or look for certain flexible features that can help you reach your goals sooner.

Your mortgage renewal is the best time to take stock and make any changes, as you won't have to pay a penalty to break your term. But, those changes can take time, for any number of valid (or human-fallible) reasons.

What happens if your renewal date passes without a new contract in place?

Your mortgage contract will lapse into a temporary term if your current lender doesn't receive a signed renewal agreement, or the mortgage isn't paid out on or before the maturity date (e.g. if you're switching lenders).

The length and terms of the temporary mortgage will depend on the lender, with the most common ones being:

• An open variable-rate term at Prime +3% or 4%
• A closed 6-month convertible term at Prime + 3% or 4%

The lapse means you'll spend needless time dealing with the details and ensuring your mortgage contract gets back on track (banks can be a tricky bunch if you or an expert broker is trying to blow an airhorn to get things moving).

So, if you start your renewal process too late, you may pay more in cash and worry lines.

What's the difference between an open, closed, and convertible mortgage?

An open mortgage means you can make changes at any time, such as a larger pre-payment than is typically allowable or choosing a different rate type (variable vs fixed mortgage rate) without paying a penalty.

A closed mortgage means you can't make significant changes without breaking the contract, and you'll pay a pre-payment penalty if such a change is needed.

A convertible mortgage is a closed mortgage that retains a penalty for most major changes, but allows the flexibility to convert to a longer term or different rate type.

How much time should you allow for your renewal process?

Is your mortgage contract with a federally regulated financial institution, like a bank or non-bank lender? It must provide you with a renewal offer (also called a renewal statement) at least 21 days before the end of your existing term.

However, you should give yourself at least a month for your renewal process to help ensure you won't hit any snags that could result in more time needed to resolve them.

How far in advance can you renew your mortgage?

You can typically start the mortgage renewal process up to 4 months (120 days) before your current term ends, allowing you ample time to explore options and potentially secure a better rate or mortgage.

If you haven't yet received your renewal offer (it may be sitting in your online account), contact your lender for the statement. It will help you assess where you stand, and what a better deal might look like.

Is it better to renew your mortgage right away or wait?

Ultimately, deciding whether to renew at the start of your 4-month renewal period or wait depends on your personal financial goals and risk tolerance. 

If you think rates may be going up, renewing on the earlier side can help you avoid the added interest costs. On the flip side, if you think rates may go down, waiting until 4-6 weeks before your renewal date may offer the chance to get a lower mortgage rate.

Ideally, use a True North broker. We're independent and salaried (non-commissioned) for unbiased advice.

Not having to watch rates is one of the most compelling reasons to contact a True North broker right away, as they can hold your rate (depending on the lender) to help cushion against changes while you decide. And help you snag a better deal or lower rate if one becomes available before you renew.

Can a bank refuse to renew a mortgage in Canada?

In most cases, as long as you've made all your payments on time, there's no immediate reason to think your current lender would deny your mortgage renewal. 

But yes, your lender isn't obligated to offer you a renewal and may decide not to. In this case, the lender must notify you at least 21 days before the end of your term.

A lender's reasons for not renewing a mortgage can include:

• Significant changes in your financial or credit situation
• Despite previously approving your mortgage, it may carry too high an LTI (loan-to-income) ratio due to recent changes in traditional criteria
• You've shown difficulty making your mortgage payments on time

Instead of denying you a renewal contract, you may instead face a much higher mortgage rate to stay.

If your bank doesn't renew — what are your options?

If you can't renew with your current lender, True North has access to several alternative and private lenders that may be able to extend a mortgage approval.

Our expert brokers have the speed and flexibility to source the right mortgage solution at your best possible rate — ideally, in time for the mortgage maturity date.

If you need a short-term mortgage solution to see you through, you can work with your broker to get back with a traditional (A) lender for your next renewal.

Is there ever a good reason to allow your mortgage renewal date to lapse?

You may be comfortable with the temporary higher rate and term, especially if you're lapsing into a short-term open or convertible mortgage, both of which allow you to forego a penalty to sign to a longer term.

• You're about to pay off your mortgage in full (with a closed convertible mortgage, a prepayment penalty will apply)
• The delay is due to moving homes, and the extra cost will be absorbed in the transaction (as per the following reason)
• The renewal-lapse term is replacing the need for a bridge mortgage
• The accepted lapse is due to personal or financial reasons (e.g. travel, divorce, or medical issues)

Your expert broker is the wake-up call you need.

If hitting the '10 more minutes' button is your thing, we suggest applying online or calling a highly trained True North mortgage broker to ensure your mortgage doesn't sleep past better rates or options.

We rise early and grind the lenders and rates so you don't have to. We've been here for almost two decades, garnering an impressive number of 5-star reviews, giving you a better (savings) choice (in your preferred language) than just silently signing with your bank.

Wherever you are in Canada, wake up to a better renewal deal — online, over the phone, or by email. Or stop by a True North store for fresh coffee and friendly, in-person help.