If your mortgage is coming up for renewal, simply signing your lender’s renewal offer could cost you money. Mortgage renewal is an opportunity to compare rates, negotiate better terms, review your financial goals, and potentially save thousands of dollars over your next mortgage term. For homeowners in Edmonton and across Alberta, starting the renewal process early can give you more options and help you avoid costly mistakes.
What Happens When Your Mortgage Comes Up for Renewal?
A mortgage renewal happens when your current mortgage term ends but you still have a balance owing. At that point, you need to either renew your mortgage, switch to another lender, or pay the remaining balance in full.
Your existing lender will typically send you a renewal offer outlining your new interest rate, term and payment details. But you do not have to accept that offer.
The Financial Consumer Agency of Canada (FCAC) recommends shopping around a few months before your mortgage term ends rather than waiting for your renewal letter. It also recommends negotiating with your current lender, as you may qualify for a lower rate than the one initially offered.
Here are some of the most common mortgage renewal mistakes Edmonton and Alberta homeowners should avoid.
1. Automatically Accepting Your Lender’s Renewal Offer
One of the biggest mistakes homeowners make is assuming their current lender is automatically offering them its best mortgage rate.
That isn't necessarily the case.
Your lender already has your business, so accepting the renewal offer without comparing alternatives can mean missing an opportunity for a better rate or more favourable mortgage terms.
Even a relatively small difference in your mortgage rate can make a meaningful difference in interest costs over a three- or five-year term.
Before signing, compare your lender's offer with other available mortgage products.
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2. Waiting Until the Last Minute
Don't wait until a week or two before your mortgage maturity date to start looking at your options.
Starting your mortgage renewal process several months in advance gives you time to:
Review your current financial situation
Compare rates and lenders
Discuss fixed versus variable mortgage options
Consider different term lengths
Negotiate with your current lender
Prepare documentation if you decide to switch lenders
The FCAC specifically recommends that Canadian homeowners start shopping around a few months before the end of their mortgage term.
The more time you have, the less pressure there is to simply accept whatever your current lender offers.
3. Focusing Only on the Lowest Mortgage Rate
The lowest interest rate can be attractive, but rate shouldn't be the only factor you consider when renewing your mortgage.
Two mortgages offering similar rates can have very different features and restrictions.
Consider things such as:
Prepayment privileges
Prepayment penalties
Fixed versus variable rates
Portability if you sell your home
Payment flexibility
Ability to make lump-sum payments
Mortgage registration type
Restrictions associated with transferring or refinancing
For example, a slightly lower rate may not save you money if the mortgage has restrictive terms and you need to sell or refinance before the term ends.
The goal isn't simply to find the lowest rate. It's to find the mortgage product that makes the most sense for your financial plans.
4. Assuming You Have to Stay With Your Current Lender
You don't have to renew your mortgage with the lender you're currently using.
Renewal can be one of the best times to explore your options because your existing mortgage term is ending.
Another lender may offer a better rate, different mortgage features or a product that better matches your current financial situation.
There may be costs involved with changing lenders, including discharge, registration, appraisal or administrative fees in some situations. The FCAC recommends asking whether the new lender is willing to cover some or all of the costs associated with switching.
That's why it's important to compare the overall cost and benefits, not just the advertised mortgage rate.
5. Not Reviewing Your Financial Goals
A lot can change during a mortgage term.
Maybe your income has increased. Maybe you've accumulated other debt. Perhaps you're planning renovations, considering an investment property, expecting to move, or hoping to become mortgage-free sooner.
Your renewal is an opportunity to ask:
Does my current mortgage still work for where I'm going financially?
You may want to consider changing your payment frequency, increasing your payments, making a lump-sum payment or choosing a mortgage with greater flexibility.
If you're carrying higher-interest debt, renewal may also be a good time to discuss whether refinancing or debt consolidation makes sense.
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6. Confusing a Mortgage Renewal With a Refinance
Mortgage renewal and mortgage refinancing aren't the same thing.
A mortgage renewal generally means establishing new terms for the mortgage balance you already owe when your current term ends.
A mortgage refinance involves changing the mortgage itself, such as borrowing additional funds against your home's equity, changing the amortization, or restructuring debt.
Refinancing can potentially be useful if you want to:
Consolidate higher-interest debt
Access equity for renovations
Purchase an investment property
Restructure your finances
Change your mortgage amortization
However, refinancing can come with different qualification requirements and costs.
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7. Extending Your Amortization Just to Lower Your Payment
When mortgage payments increase, extending your amortization can make the monthly payment more manageable.
But there's a trade-off.
A longer amortization means you're paying the mortgage over a longer period, which can significantly increase the total amount of interest you pay.
The FCAC specifically cautions homeowners to think carefully before extending their amortization simply to reduce their mortgage payments, because doing so can add thousands—or even tens of thousands of dollars—to total interest costs.
Look beyond the monthly payment and consider the total borrowing cost.
8. Not Negotiating With Your Current Lender
Your renewal offer isn't necessarily the final offer.
If you've compared mortgage rates and found a more competitive option elsewhere, bring that information to your existing lender and ask whether they can improve their offer.
Your lender may be willing to negotiate to keep your business.
The FCAC specifically encourages mortgage holders to negotiate and notes that borrowers may qualify for a discounted rate below the rate quoted in their renewal letter.
You won't know unless you ask.
9. Ignoring Your Future Plans
Before committing to another mortgage term, think about what the next few years could look like.
Are you considering selling your Edmonton home? Moving to another community? Buying a larger home? Downsizing? Purchasing an investment property?
If there's a reasonable chance you'll sell before your next mortgage term expires, factors such as portability and prepayment penalties can become extremely important.
A five-year fixed mortgage might look attractive today, for example, but it may not be the best choice if you're expecting to sell in two years.
Your mortgage should support your plans—not restrict them.
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How Can a Mortgage Broker Help at Renewal?
A mortgage broker can review your existing lender's renewal offer and compare it with mortgage options available from other lenders.
Instead of evaluating one lender's products, you can look at different rates, terms and mortgage structures to determine what fits your situation.
For Edmonton and Alberta homeowners, this can be particularly useful when your finances or plans have changed since you originally obtained your mortgage.
At MetroYEG Realty & Mortgage Team, our mortgage team can help you review your renewal, refinancing and financing options and understand how each choice could affect your payments and longer-term goals.
You can also verify the licensing of Alberta mortgage professionals through the Real Estate Council of Alberta (RECA). The Government of Alberta directs consumers with mortgage-broker questions to RECA.
Don't Just Renew—Review
Your mortgage renewal isn't paperwork to sign and forget about. It's an opportunity to make sure your mortgage still works for you.
Start early, compare your options, understand the terms and consider your plans for the next several years before committing to another mortgage term.
If your mortgage is coming up for renewal in Edmonton, Sherwood Park, St. Albert, Fort Saskatchewan, Leduc, Spruce Grove, Stony Plain or elsewhere in Alberta, the MetroYEG Mortgage Team can help you review your current renewal offer and explore your options.
Thinking about renewing your mortgage? Contact MetroYEG before signing your lender's renewal offer and find out what other options may be available.
Frequently Asked Questions About Mortgage Renewals
How early should I start shopping for a mortgage renewal?
It's a good idea to start reviewing your mortgage options a few months before your current term ends. Starting early gives you time to compare lenders, negotiate your rate and determine which mortgage structure fits your financial plans. The FCAC recommends shopping around a few months before the end of your term.
Do I have to renew my mortgage with the same lender?
No. You are not required to renew with your current mortgage lender. At renewal, you can compare other lenders and switch if another mortgage better meets your needs. Depending on the mortgage, there may be transfer, discharge, appraisal or registration costs to consider.
Can I negotiate my mortgage renewal rate?
Yes. Your lender's initial renewal rate isn't necessarily its best available rate. You can ask for a better offer and use competing mortgage offers as part of your negotiation. The FCAC specifically recommends negotiating with your existing lender.
Is it worth using a mortgage broker for a renewal?
A mortgage broker can help you compare your existing lender's renewal offer with options from other lenders. This can help you evaluate not only the interest rate but also mortgage terms, penalties, prepayment privileges and flexibility.
What happens if I don't renew my mortgage?
If you still owe money when your mortgage term ends, you need to renew the mortgage, switch lenders or pay the remaining balance. Some mortgages may automatically renew if you take no action, but an automatic renewal may not provide the rate or terms best suited to you.
Helpful Mortgage Renewal Resources
For additional information about mortgage renewals in Canada, visit the Financial Consumer Agency of Canada's Mortgage Renewal Guide.
Alberta homeowners can also find information about financial institutions and mortgage broker oversight through Government of Alberta – Financial Institutions: Information for Consumers.
