3 tips to make mortgage renewal time easier

Unless you have the money to pay off the entire balance of your mortgage in your first term, you will have to face a few mortgage renewals.

A renewal involves taking the outstanding balance of your mortgage and renewing it for another term at a new (and hopefully lower) interest rate.

You’ll know it’s time to renew when your current mortgage provider sends you a renewal notice. It typically includes a new mortgage rate and term offer. However, it’s in your best interest to take a more proactive approach. Here are our top three tips to prepare for an easier mortgage renewal time:

1. Consider your current financial goals

Before you simply accept your renewal offer, review your financial goals.

First, determine if your current provider can offer a mortgage product that suits your needs. For example, if have a five-year fixed rate right now, the renewal slip will likely be for another five-year fixed. If you think you’ll stay in your home for that amount of time, that works just fine. But if there’s a chance you’ll downsize or move to a new city in the next few years, you may want to look for a three-year mortgage product instead.

Second, consider your prepayment options. If you could receive a bonus, inheritance or some other source of extra funds, consider how the mortgage renewal could affect your prepayment options.

2. Negotiate and shop around early in the process

Last-minute planning isn’t a winning strategy for mortgage renewals.

While your current lender will likely send you a renewal slip sometime in the last 30 days of your mortgage term, you can generally start negotiating as early as 120 days before your maturity date.

If you can’t negotiate a better offer, starting early gives you enough time to consider switching providers. You may not be able to switch your mortgage over until your actual renewal date arrives, so it’s best to give a mortgage broker time to find the best product available.

3. Ask for a better mortgage rate

Often, the route to a better mortgage rate begins by simply asking for one.

Lenders make it incredibly easy for you to renew with them, but you’ll literally pay for the convenience. On average, mortgage providers offer existing customers a discount of only 0.25 per cent off their posted rate upon renewal.

Some people are too intimidated to negotiate with lenders. But you can ask your provider for a better mortgage rate and, if they want your business, they will offer you one.

And if they don’t, maybe it’s time to shop around.