Optimal Timing for Initiating Mortgage Renewal in Canada

Jonathan Alphonso
4 min readJun 11, 2024

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Family looking at renewal options

Getting a mortgage renewal right is a careful process. Your lender needs to give you enough time to make a good decision based on factors such as the terms and interest rates.

Lender incentives can influence the timing of a successful mortgage renewal. Borrowers must consider several metrics, including their long-term and short-term financial goals.

Understanding Mortgage Renewal Deadlines

One big reason to be aware of the information surrounding mortgage renewal deadlines is that you can lock in a lower interest rate. Some lenders can lock you in at a higher rate if you miss a renewal deadline.

Here’s some information to get started.

  • The Government of Canada makes an important point very clearly. Borrowers need enough time to make a good decision and prepare for the process. That’s why lenders must notify those holding mortgages 21 days before their term ends. Remember, a term is a specific length of time in the agreement. It can detail the payment schedule and interest rates, but it’s not the amortization period. Usually, these terms are between one, three and five years. Borrowers can pay off what’s owing on the principal or renew the mortgage at the end of the term.
  • Shopping around when you need to renew a mortgage has some other advantages. For example, some institutions don’t charge any penalties for early renewals, which can be up to 120 days before the term ends. However, renewing your mortgage early is only sometimes in your best interest because there can be fines. You’ll need to consider different penalties, including three months of interest used on variable mortgages by some lenders.

You should look at your finances when the renewal date is still in the future. That’s the time to make adjustments, like planning to change the payment frequency or consolidating some debts on a new term. Timing is everything when it comes to these mortgage renewals.

Factors Influencing Timing

Getting the timing right can help a borrower get a reasonable interest rate when the renewal time comes. Here are some boxes to check to get the best deal.

Incentives

Lenders are interested in ensuring they keep your business and many offer incentives for early renewal.

  • Some offer the chance to lock in at a low-interest rate before the existing term ends.
  • If you’re diligent when renewal time is approaching, you can find a lender who waives some of the fees associated with the process, such as administrative charges.
  • Some lenders offer other incentives like additional prepayment options to encourage early renewal.

Borrowers should also monitor interest rates to save money over their next term. There are also other benefits to early renewal to consider.

Benefits of Early Renewal

Early renewal has some other benefits and advantages, including the following.

It Can Provide a Financial Foundation

Early renewal allows you to adapt your mortgage to suit your changing needs. You get a stable interest rate and monthly payment numbers with a fixed interest rate. That way, you can manage your financial budget more effectively.

Looking at the overall financial picture can help you make some excellent choices. For example, Chartered Professional Accountants Canada (CPA) provides a tip for optimizing your mortgage payments after you’ve finalized a budget. They report that increasing your bi-weekly payments from $483 to $500 will allow the average homeowner to save over $7,200 in interest costs over 25 years.

Early Renewals Can Offer Flexibility

It’s possible to negotiate for better conditions and terms, like larger prepayment options and flexibility in payment frequency. Different banks will allow you to renew your mortgage early, but they have different early renewal windows. For example, the RBC has a 6-month 180-day window like Scotiabank. Numbers from WOWA.ca report that ATB Financial has a three-month (90-day) early renewal offer as of June 2024.

Early renewals are good, but leaving things too long can have consequences.

Risks of Delayed Renewal

The renewal statement will include information such as the remaining principal at the renewal date, the interest rate, and the payment frequency. Missing a renewal day can have consequences, such as automatic renewal.

When this happens, you might have gotten better conditions and terms if you negotiated earlier. Some lenders can even automatically renew borrowers into a closed mortgage.

Then, there’s the worst-case scenario when your mortgage renewal is denied. There are several reasons this might happen, including a debt-to-income ratio that’s too high or a falling credit score. If you’ve missed multiple payments and failed to make some, you can be at risk of a power of sale or foreclosure.

Getting the whole mortgage renewal process right can come down to timing.

Strategies for Timing Optimization

Timing is essential for getting the most from a mortgage renewal, and borrowers should understand that the days before your due date are imperative.

  • This is the perfect time to consider your financial situation and goals in the long term and short term. Prepayments are an excellent way to reduce your debt so that if the rates go up, you won’t be in danger of default.
  • Shopping around can make a difference, so you’ll have some leverage. You can negotiate a better rate from your current lender by quoting other numbers from other institutions.
  • Remember that renewing your current rates and terms can help you get a good starting point. Take advantage of any tools you find to get an idea of the rates and terms that are being offered, like this one.

Resources are essential, especially from private lenders who understand the mortgage renewal process.

Looking For Advice and Products From A Private Mortgage Expert?

Mortgage Broker Store looks after private mortgage-related products, including bad credit mortgages. Applications that don’t meet conventional lending requirements are one specialty. Our team of private lenders, brokers, and licensed mortgage agents can help. We can help you get a loan that suits your requirements today.

Email ron@mortgagebrokerstore.com or call 416–499–2122.

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Jonathan Alphonso

Mortgage Agent, Web Developer, and Real Estate Investor. Together with Ronald Alphonso I run MortgageBrokerStore.com. I write about mortgage related topics.