Start a year out, not when the letter arrives
The best time to start thinking about your renewal is about a year before it's due. Waiting for the letter can mean a missed opportunity.
In the last year of your term, the cost of moving early is often much smaller. If rates have dropped since you signed, that can open the door to locking in a lower rate for your next term before your renewal date, and the savings can add up over the next five years. I'll run the numbers so you know whether it's worth it.
Many lenders will also hold a rate for about 120 days. I tell clients you can have your cake and eat it too: take a rate hold today. If rates go down, we renew the hold at the lower rate. If rates go up, you're protected.
What's really in the renewal letter
Your renewal letter is a contract with a list of options, and usually one of them is highlighted as the "discounted" choice, plus a number to call.
It works a bit like small, medium and large drink sizes: the difference looks so small that you feel you're getting a good deal. And many people take it: in a recent Mortgage Professionals Canada survey, 41% of borrowers accepted the first rate their lender offered at renewal, and only 8% said they negotiated significantly. CMHC's 2024 survey found 72% of mortgage consumers stayed with their existing lender. Signing without comparing is the biggest mistake, because sitting down with a mortgage broker to go over your options costs you nothing.
Why the bank's offer isn't always the best one
Sometimes it's nothing sinister. Rates move quickly, and by the time an offer is prepared, checked, printed and mailed, the market may have moved and it's no longer the best option.
Other times, the offer simply isn't as sharp as it could be. Banks hope you'll sign and send it back, because it's the cheapest outcome for them. If you work with a broker, the lender pays the broker for arranging the mortgage. Even when the rate ends up the same, a broker might find you a better amortization or a better mix for your cash flow.
What switching lenders actually involves
Switching at renewal usually means providing current income documents, and sometimes an appraisal (often an automated one). You'll need to qualify with the new lender.
- Is it a hassle? No. I handle most of it.
- Is there a cost? Usually not. Switching at the end of your term means no penalty, and the new lender typically covers the switch costs. It's the same mortgage moving to a new home.
I only recommend switching when the difference is worth it: real savings, or a specific strategy, like moving to a mortgage with a built-in line of credit to improve your cash flow.
A renewal is a check-up, not just a rate
Renewal is a great time to consolidate debt, free up equity, change your amortization or add a line of credit. It's an even better time to look at where you are in life:
- Building wealth? If you're younger, we might lengthen your amortization to free up cash flow and get investments growing early.
- Protecting wealth? We focus on stability and keeping what you've built.
- Paying down debt? Using your home equity to pay off debt only makes sense if it doesn't come back. We'll look at your budget, your TFSA and your other goals together.
Fixed or variable? It starts with your cash flow
I don't start with rates. I start with your cash flow, your payment comfort, your income and what's coming up in your life. Then I show you how the options could play out, look at how comfortable you are with payments that change, and make a recommendation. If it fits, great. If not, we look at another.
What people overlook
The mortgage rate matters, but it's one of the lowest rates you'll ever pay on borrowed money. What often matters more is everything around it: credit cards, lines of credit, spending.
A few traps I see:
- Taking a payment that's too aggressive, when keeping a comfortable payment and prepaying would give you more flexibility.
- Grabbing a very short term for a low rate, then facing a much higher payment when it ends.
- Choosing a variable mortgage with a fixed payment without understanding what happens if rates rise.
How I handle my clients' renewals
If you're my client, your renewal never sneaks up on you. You get regular reports on your mortgage, and in the year before your renewal we set a game plan. By March of your renewal year, we have your tax documents ready, so when the renewal comes in, we already know exactly what we're dealing with.
Common worries
"I've been with my bank for 20 years. Won't they give me their best deal?" Loyalty doesn't count the way it used to. The people who knew you may have moved on, and renewal pricing is now largely set by systems built for profitability. It isn't personal. That's exactly why it's worth comparing.
"Do I have to requalify to switch lenders?" Yes. That's why we meet a year out: to find out whether you qualify to switch. If you don't yet, we make a plan, especially if your rate is going up and we need to offset that.
Sources: Mortgage Professionals Canada survey, reported by Canadian Mortgage Trends (June 2024) · CMHC, Understanding today's mortgage consumer (2024)