Mortgage renewal: Seven questions to ask before signing
AVIE | PRACTICAL GUIDE
Is your mortgage renewal coming up? Before signing your current lender’s offer, take the time to compare your contract terms with your budget, plans and other available options.
The interest rate is important, but it’s not the only factor to consider when choosing a mortgage. The term length, prepayment privileges, penalties, portability and any fees can also have a significant impact on your situation.
Start comparing a few months before your term ends
Don’t necessarily wait until you receive your renewal notice to get started. The Financial Consumer Agency of Canada recommends shopping around a few months before your term ends and comparing offers from different lenders or brokers. [1]
Starting early gives you time to gather your documents, compare similar offers and make a decision without unnecessary pressure.
Before you begin, get your most recent mortgage statement. Note the balance to be renewed, your current rate, the maturity date, the remaining amortization period and any anticipated changes in your circumstances. A move, renovations, a change in income or a real estate investment plan can affect which option is most suitable.
Look beyond the advertised rate
Two offers may have similar rates but very different terms. To compare them fairly, ask for scenarios based on the same amount to be financed, the same amortization period and a comparable term.
What type of rate suits my situation?
A fixed rate generally provides greater predictability during the term. A variable rate may change depending on the terms of the contract and market rates. The Autorité des marchés financiers recommends considering your risk tolerance, budget and needs before choosing. Ask how a rate change could affect your payments, amortization period and budget. [2]
What term length fits my plans?
The best term isn’t the same for everyone. If you plan to sell, move, refinance or change your financial situation in the next few years, make sure that a longer, less flexible term really suits your plans.
What additional payments are allowed?
Check the prepayment privileges. Contracts may limit the amount you can pay down without a penalty or how much you can increase your payments. Make sure you understand these details before signing. [2]
How does the penalty work if I end the contract before it matures?
Prepayment penalties can be substantial, especially with certain closed mortgages. Ask how they are calculated and under what circumstances they may apply. [2]
Can I transfer the mortgage if I move?
A portable mortgage can be useful if you plan to buy a new property before your term ends. Ask about the conditions, fees and limitations of this option.
You don’t have to renew with the same lender
Your current lender’s renewal offer is worth considering, but it isn’t your only option. You can also compare terms offered by other institutions. You may be able to transfer your mortgage to another lender for the same amount, subject to approval by the new lender and its eligibility criteria. [1]
Changing lenders can involve fees. Depending on your file, these may include administrative, appraisal, discharge, registration, legal or notarial fees. Ask for a complete estimate of these costs before comparing an offer. [1]
An offer with a lower rate isn’t automatically the best choice if fees, penalties or less flexible terms offset the apparent savings.
Seven questions to ask before signing
1. What will my payment be, and how much principal will remain at the end of the term?
2. Will my amortization period change? If so, how will this affect the total interest cost?
3. Is the rate fixed, variable or hybrid? How could the rate and payments change?
4. What additional payments can I make without a penalty?
5. How is the penalty calculated if I sell, refinance or end the contract before it matures?
6. Can I transfer the mortgage to another property? What conditions apply?
7. If I change lenders, what fees should I expect, and who pays them?
Keep the answers and offers in writing. This will make it easier to compare the terms and make an informed decision.
Renewal is also a good time to review your goals
Your circumstances may have changed since you signed your last term. Renewal can be an opportunity to review your budget, priorities and ability to repay.
Extending your amortization period can lower your payments in the short term, but it can also increase the interest you pay over time. It’s important to understand this trade-off before changing the structure of your financing. [1]
Get a comparison tailored to your situation
At AVIE, we take the time to review your mortgage renewal in light of your situation, plans and the terms you’re comparing. Our goal is to help you understand the key elements of each option before you choose.
AVIE serves clients in Saint-Lambert, the South Shore and Greater Montreal in French, English, Romanian and Russian.
Learn more
Important information This article provides general information. Every mortgage situation is different. Before making a decision, take the time to review the terms that apply to your situation and ask a qualified professional any questions you may have.
Useful sources
[1] Financial Consumer Agency of Canada — Renewing your mortgage
[2] Autorité des marchés financiers — Features of mortgage loans