Renewing your mortgage
The Financial Consumer Agency of Canada (FCAC) has expectations for federally regulated financial institutions. FCAC expects them to help you if you're struggling to pay your mortgage due to exceptional circumstances.
What it means to renew your mortgage
When you get a mortgage with a lender, your contract is in effect for a specific period of time. This is called the mortgage term and it can range from a few months to five years or longer.
You have to renew your mortgage at the end of each term unless you pay the balance in full. You'll most likely require multiple terms to repay your mortgage in full.
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. Your lender must also notify you 21 days before the end of your term if they won’t renew your mortgage.
The lender will provide you with paper statements or electronic statements, if you consent to this method of communication.
A renewal statement must contain the following information:
- 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 won't increase until your renewal date.
You may receive a mortgage renewal contract at the same time as a renewal statement.
Review your mortgage needs
When your mortgage term comes to an end, you have to pay off your mortgage in full or renew it. This is a good time to review your mortgage needs and make sure you have the right product.
To help you find the right mortgage, consider if:
- your budget allows you to increase your payments to pay off your mortgage sooner and save on interest
- you want to change your payment frequency
- you’re likely to make additional payments
- you’re satisfied with the services offered by your current lender
- you want to consolidate other debts that have higher interest rates and increase the amount of your mortgage
- you still need optional life, critical illness, disability or employment insurance
If your lender is a federally regulated bank, they must offer and sell you products and services that are appropriate for you, based on your circumstances and financial needs. They also must tell you if they’ve assessed that a product or service isn’t appropriate for you. Take the time to describe your financial situation to ensure you get the right product. Don't hesitate to ask questions and make sure you understand the mortgage you have or want.
You don’t have to renew your mortgage with the same lender. You can move your mortgage to another lender if their conditions better suit your needs.
Start shopping around a few months before the end of your term. Contact various lenders and mortgage brokers to check if they offer mortgage options 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. Tell your lender about offers you received from other financial institutions or mortgage brokers. You may need to provide proof of the offers you receive. Make sure you have this information on hand.
If you don’t take action, the renewal of your mortgage term may be automatic. This means you may not get the best interest rate and conditions. If your lender plans on automatically renewing your mortgage, it will say so in the renewal statement.
Switching to another lender
You may decide to switch your current mortgage to another lender for a loan of the same amount. If this is the case, the new lender will need to approve your mortgage application. The new lender may use different criteria than your original lender to decide if you qualify for a mortgage.
Costs to change lenders
Make sure you find out the costs of changing lenders, such as:
- setup fees with the new lender, which may include discharge, registration, transfer and/or assignment fees 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 your costs to switch.
Mortgage loan insurance premiums when you switch lenders
You may have to pay a new mortgage loan insurance premium when you switch lenders, if:
- the amount of your loan increases
- you extend the amortization period
If you already have mortgage loan insurance on your existing mortgage, tell your new lender. This may help you avoid paying mortgage loan insurance premiums twice. Ask your existing lender for a certificate number. They can provide you with a copy of the insurance certificate when you receive your mortgage contract.
You need to sign the registration documents that are part of your mortgage contract. You may have to meet with your lawyer or notary.
Switching mortgage lenders if you have a collateral charge
Your mortgage can be registered with a collateral charge. If that’s the case and you want to switch lenders, you may have to pay fees. These fees cover the removal of the charge from your existing mortgage and the registration of the new one.
You must meet certain criteria 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. This includes car loans or lines of credit.
To find out if your mortgage has a standard or a collateral charge, ask your lender, lawyer or notary. Allow a few months before your renewal date. This will allow you time to consider your options based on how your mortgage is registered.
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