Mortgage Renewal Tips: How to Save Money and Get Better Terms

If your mortgage term is about to end, you might be wondering whether you can negotiate better conditions or if you should just agree with whatever terms the lender offers you. In that case, you’re in the right place. This post will go over everything you need to know before renewing your mortgage.

What Is a Mortgage Renewal?

All house mortgages have an amortization period, which is the total amount of time it is going to take you to pay off the entirety of the loan amount (usually very long, for instance, 30 years), and several mortgage terms, which are usually 1 to 5 years each. When a mortgage term ends, you, the borrower, can reconsider and change the mortgage terms or just switch to a different bank or lender entirely.

However, we should note that not all countries behave like this. For example, in the US, terms usually match the amortization, meaning that you have to stick with the same rates, conditions, and lender for the whole amortization period. But that is not the case in a country like Canada, which is our primary focus here.

What Is A Mortgage is also a read we highly recommend.

When Should You Start Preparing for Renewal?

Firstly, you do not want to wait around until there’s only one week left to renew your mortgage. In fact, experts recommend that you start asking around and talking to different lenders a couple of months before the renewal date to see if you can find a better interest rate or better loan conditions overall. Here are the reasons behind this recommendation:

• Many lenders tend to send you an offer 3-6 months before it is time to renew your terms, and if you accept their conditions, you might legally not be able to change anything later.
  
  
• Comparing rates and conditions from different lenders, banks, credit unions, or mortgage brokers takes a good amount of time and energy. So, ideally, you want to start early to avoid any stress or pressure.
  
  
• Negotiating rates at the last minute is disadvantageous for you because the lender knows you don’t have much time to switch lenders, and they would have the upper hand.

Essential Mortgage Renewal Tips

Here is some mortgage renewal advice you'd better be aware of:

1. Research & Compare Lenders Early - Don’t Hurry with Offer

We already mentioned the first tips, so we won't go into details, but be careful when your current lender wants to sell you an early renewal agreement that has higher rates because they think you would go with the ‘easy option.’

2. Not Just About the Rates

When it’s time to renew, negotiate, and research, don’t just try to find loans with lower interest rates; look at the term length, prepayment privileges, payment frequency, and whether the mortgage is open or closed.

3. What Do You Want to Do in the Future?

This is very important to think about when it comes to mortgage renewals. If you plan to move, sell, or pay down faster, choose a mortgage with flexibility. If you want predictability, a longer fixed term may suit you.

4. Better Credit Score = More Negotiation Leverage

Because if you have a higher credit score compared to when you got the loan, that means that you can negotiate your way into lower rates.

5. Are the Rates Going Down?

Here is another good one: if experts are predicting lower interest rates in the coming year or years, then opt for a shorter mortgage term so that in 1 or 2 years, when the term ends, you renew your mortgage with a lower rate.

6. Penalties

Something to keep in mind is that if you want to switch lenders, some lenders charge you extra for it (small administrative costs, like appraisal or legal fees), but mostly they cover that cost themselves.

We also wrote another article called Mortgage Renewal in Canada that tells you all about the subject and how to renew a mortgage.

Common Mistakes to Avoid During Renewal

We provided a mortgage renewal checklist above that can actually be interpreted as mistakes to avoid, but either way, here are some other, lesser-known, noteworthy things, namely mistakes, to know of:

1. Not Considering The Amortization Period

Many borrowers stick with the same amortization length and end up paying way more interest in the long run. If you are earning more than you did before and can afford to pay more on a monthly basis, you can shorten the amortization period and pay less interest. On the other hand, if money is tight, you can just ask to make the period longer.

2. Sticking with the Same Mortgage Terms

Paying the same interest and sticking to whatever the previous mortgage arrangements were is a mistake because the market is always changing, and so are your finances, income, debts, etc.

3. Non-Portable Mortgages

Be careful not to renew your mortgage into a non-portable one because if you decide to move at some point in the future, it comes with hefty penalties.

4. Not Reviewing Mortgage Insurance

Many homeowners keep paying for the lender’s insurance without checking if independent coverage (or none at all) is more cost-effective.

5. Not Considering or Knowing About Blend & Extend

Sometimes you can use this option called “blend and extend,” which means that you combine your current rate with a new one and extend your term without penalties, which is a good thing because the resulting rate would be lower than the market’s current rates.

6. Ignoring Fine Print

By this, we mean the hidden clauses in the paperwork. Things such as:

• Hidden prepayment penalties. In some cases, if you break your mortgage early, it can cost you tens of thousands.
  
  
• Collateral charge, which makes switching lenders later much harder and more expensive, but this is often buried in the paperwork.
  
  
• Lenders advertise “10–20% prepayment privileges,” but the fine print may limit when and how often you can make those payments.
  
  
• Some contracts default you into an automatic renewal at a higher rate if you don’t respond by a deadline.

Benefits of a Smart Mortgage Renewal

Below, we will list some of the most significant benefits of a smart mortgage removal:

• Saving thousands of dollars in a term by reducing the rate even a little bit, maybe 0.25-0.5%.
  
  
• Reduce financial pressure and stress by extending the amortization period and paying less monthly.
  
  
• Saving a lot of money by shortening the amortization period because you can afford to pay more monthly.
  
  
• Choosing the right type of mortgage (fixed, variable, open, or portable) gives you breathing room in case of unexpected life events.
  
  
• By reading the fine print and picking terms wisely (like portability or fair prepayment penalties), you protect yourself if you need to break the mortgage.

In Mortgage Interest Deduction, we have gone in-depth regarding that specific topic.

FAQs

1. How early can I renew my mortgage? 

Most lenders allow early renewal within 4-6 months of your term ending. Some may offer options even earlier.

2. Do I need to requalify for mortgage renewal?

Not if you stay with your current lender. If you decide to switch, then yes, you need to requalify and pass the stress test again.

3. Can I switch lenders during renewal?

Yes, you can.

4. What happens if I miss the renewal deadline?

Your mortgage may roll into an open term at a much higher rate, costing you more until you finalize a new agreement.

Final Thoughts: Take Control of Your Mortgage Renewal

All in all, what we are trying to say in this article is that you can easily be smart about your mortgage renewal by doing a bit of research, asking around, and negotiating. Make sure to act early and take a look at your financial situation in order to tailor the conditions of the mortgage to your liking.