Somewhere around four months before your term ends, a letter arrives from your lender with a rate on it and a place to sign. It looks like a form. It is actually an opening offer, and a lot of people sign it because signing is easy and shopping feels like work.
Why the first offer is rarely the best one
Lenders know that most borrowers renew without shopping. The rate on that letter reflects that. It is not a trick, it is just business, and the only way it costs you money is if you sign without comparing.
On a $450,000 balance, a difference of half a percentage point works out to roughly $115 a month. Over a five year term that is around $7,000. That is what fifteen minutes of comparison is worth.
Renewal is also your cheapest chance to restructure
At renewal you can move lenders with no penalty. That makes it the natural moment to look at more than the rate:
- Roll high-interest debt into the mortgage while you are already moving the file
- Shorten or extend your amortization depending on where cash flow sits
- Add a home equity line of credit behind the mortgage for future flexibility
- Switch between fixed and variable based on what has actually changed in your life
The stress test question
If you are switching lenders at renewal you may need to qualify under the stress test again. Staying with your current lender usually avoids it. That matters if your income has changed, and it is worth checking early rather than discovering it three weeks before your maturity date.
When to start
Four to six months out. Most lenders will hold a rate for 90 to 120 days, which means you can lock something in and still take the better option if rates move down before you close.
If your renewal is coming up this year, want me to take a look at the offer before you sign it?
Lora Fenn, Mortgage Agent Level 1, Lic. #M25003153. Dominion Lending Centres YBM Group, FSRA #11129. 705-881-2780 · lfenn@dominionlending.ca
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