Renewing your mortgage
Your renewal statement
If your mortgage contract is with a federally regulated financial institution, such as a bank, the lender must provide you with a renewal statement at least 21 days before the end of the existing term.
A renewal statement must contain the same type of information that is in your current mortgage contract, such as:
- the balance or remaining principal at the renewal date
- the interest rate
- the payment frequency
- the term
- any charges or fees that apply
The renewal statement must also specify that the interest rate offered in the renewal statement won't increase until your scheduled renewal date.
The financial institution may provide the statement to you as a paper document, or electronically if you consent to receive required information in electronic format.
You may receive a mortgage renewal contract at the same time as a renewal statement.
If your lender decides not to renew your mortgage, it must notify you at least 21 days before the end of your term.
Review your mortgage needs
When your mortgage term comes to an end, you'll need to pay off your mortgage or renew it for another term. This is a good time to review your needs and make sure you have the right mortgage if your needs have changed.
Ask the following questions to help you find the right mortgage:
- Does your budget allow you to increase your mortgage payments so you can pay off your mortgage sooner and save on interest charges?
- Do you want to change your payment frequency? For example, switching from monthly payments to accelerated bi-weekly payments may let you pay off your mortgage more quickly.
- Do you think you're likely to make additional prepayments?
- Are you satisfied with the services offered by your current lender?
- Do you want to consolidate other debts that have higher interest rates and increase the amount of your mortgage loan?
- Do you still need, or need to add, optional life, critical illness, disability or employment insurance to protect the balance of your mortgage?
You don’t have to renew your mortgage with the same lender. You can choose to move your mortgage to another lender if it offers you terms and conditions that better suit your needs.
Start shopping around a few months before the end of your mortgage term. Contact various lenders and mortgage brokers to check if there is a mortgage option with terms and conditions that better suit your needs. Don’t wait until you receive the renewal letter from your lender.
Negotiate for a better interest rate
Negotiate with your current lender. You may qualify for a discounted interest rate that is lower than the rate quoted in your renewal letter. When you negotiate an interest rate, tell your lender about offers you've received from other financial institutions or mortgage brokers.
If you don’t take action, your mortgage may automatically be renewed for another term. This means that you may not get the best interest rate and conditions. If your lender will automatically review your mortgage, it will say so in the renewal statement.
Switch to another lender
You may decide to switch your current mortgage loan to another mortgage lender for a loan of the same amount. If this is the case, the new lender will need to approve your mortgage application. The criteria the new lender uses to decide if you qualify for a mortgage may be different from those used by your original lender.
Qualifying interest rates for mortgages
If you want to switch lenders and your new lender is a bank, you may need to pass a “stress test”.
Credit unions and other lenders that are not federally regulated may choose to use this mortgage stress test. They are not required to do so.
The bank may require you to prove you can afford payments at a qualifying interest rate which is typically higher than the actual rate in your mortgage contract. This will depend on whether or not you have mortgage loan insurance.
If you have mortgage loan insurance, the bank is not required to use a stress test, although they may choose to do so.
If you don’t have mortgage loan insurance, the bank must use the higher interest rate of either:
- the Bank of Canada’s conventional five-year mortgage rate
- the interest rate you negotiate with your lender plus 2%
If you’re renewing your mortgage with your own bank, it isn’t required to use a stress test, although it may choose to do so.
Costs to change lenders
Make sure you find out the costs of changing lenders, such as:
- set-up fees with the new lender, which may include fees to discharge the previous mortgage and register the new mortgage
- a transfer or assignment fee from your current lender
- an appraisal fee to confirm the value of your property (if necessary)
- other administration fees
Ask if your new mortgage lender is willing to pay for some or all of your costs to switch.
Mortgage loan insurance premiums when you switch lenders
If your mortgage was previously insured, you may be required to pay a new mortgage loan insurance premium when you switch lenders, if:
- the amount of your loan has increased
- you extended the amortization period, that is, the length of time it will take you to pay off your mortgage
To avoid paying mortgage loan insurance premiums twice, tell your new lender that you already have mortgage loan insurance on your existing mortgage. Ask your existing lender for a certificate number. They should provide you with a copy of the insurance certificate when you receive your mortgage contract.
You may also need to meet with your lawyer (or notary in Quebec and British Columbia) to sign the registration documents that are part of your mortgage contract.
Switching mortgage lenders if you have a collateral charge
If you want to switch lenders and your mortgage is registered with a collateral charge, you'll likely need to pay fees to remove the charge from your existing mortgage and register a new one with the new lender.
To remove the charge from your mortgage, you must repay in full or transfer to the new lender all loan agreements secured by the collateral charge, such as car loans or lines of credit.
To find out if your mortgage has a standard or a collateral charge, ask your lender or your lawyer (or notary in Quebec or British Columbia) well before your renewal date. This will allow you time to consider your options based on how your mortgage is registered.
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