If you’re a homeowner in Ontario, you may be wondering what mortgage renewal is and how it works. Renewing your mortgage is an important decision that could have a significant impact on your finances. In this article, we’ll cover everything you need to know about mortgage renewal in Ontario, including the benefits, the process, and some helpful tips.
Table of Contents
- What is mortgage renewal?
- How does mortgage renewal work?
- When should you renew your mortgage?
- Benefits of renewing your mortgage
- Lower interest rates
- Lower monthly payments
- Flexible terms
- How to renew your mortgage
- Tips for getting the best mortgage renewal deal
- Shop around
- Consider working with a mortgage broker
- Negotiate with your lender
- Understand your options
- What happens if you don’t renew your mortgage?
- Mortgage renewal FAQs
- Is it mandatory to renew my mortgage?
- How long does the mortgage renewal process take?
- Can I switch lenders when renewing my mortgage?
- Can I pay off my mortgage early during the renewal process?
- What happens if my credit score has changed since my initial mortgage?
1. What is mortgage renewal?
Mortgage renewal is the process of signing a new agreement with your lender to continue your mortgage loan for another term. Most mortgages in Ontario have a term of five years, which means that you’ll need to renew your mortgage every five years if you haven’t paid it off in full.
2. How does mortgage renewal work?
When your mortgage term is up, your lender will send you a renewal agreement that outlines the new terms and conditions of your loan. You’ll have a certain amount of time to review the agreement and decide whether you want to accept it or not. If you accept the agreement, you’ll sign it and send it back to your lender.
3. When should you renew your mortgage?
You should start thinking about renewing your mortgage about six months before your current term is up. This will give you enough time to shop around for the best renewal deal and negotiate with your lender if necessary.
4. Benefits of renewing your mortgage
Renewing your mortgage can have several benefits, including:
1. Lower interest rates
If interest rates have gone down since you first got your mortgage, you may be able to get a lower rate when you renew. This could save you thousands of dollars in interest over the life of your loan.
2. Lower monthly payments
If you choose a longer amortization period when you renew your mortgage, you could lower your monthly payments. This could free up more money in your budget for other expenses.
3. Flexible terms
Renewing your mortgage gives you the opportunity to change the terms of your loan. You could switch from a variable to a fixed rate, or vice versa, or change the length of your amortization period.
5. How to renew your mortgage
Renewing your mortgage is a relatively simple process. When your lender sends you a renewal agreement, you’ll need to review it carefully and make sure you understand the terms and conditions. If you’re happy with the agreement, you can sign it and send it back to your lender. If you’re not happy with the agreement, you can shop around for a better deal and negotiate with your lender if necessary.
6. Tips for getting the best mortgage renewal deal
If you want to get the best deal when renewing your mortgage, here are some tips to keep in mind:
1. Shop around
Don’t just accept the renewal agreement that your lender offers you. Shop around and compare rates and terms from other lenders to make sure you’re getting the best deal.
2. Consider working with a mortgage broker
A mortgage broker can help you find the best renewal deal by comparing rates and terms from multiple lenders on your behalf.
3. Negotiate with your lender
If you’re not happy with the renewal agreement your lender offers you, don’t be afraid to negotiate. You may be able to get a better rate or more favorable terms by negotiating.
4. Understand your options
Make sure you understand all of your options when renewing your mortgage, including changing the length of your amortization period, switching from a variable to a fixed rate, or changing your payment schedule.
7. What happens if you don’t renew your mortgage?
If you don’t renew your mortgage when your term is up, your lender may automatically renew it for you at a higher rate. This is called a “rollover” and it’s usually not a good deal for the borrower. You may also be charged a penalty fee for not renewing on time.
8. Mortgage renewal FAQs
Here are some common questions and answers about mortgage renewal:
1. Is it mandatory to renew my mortgage?
No, it’s not mandatory to renew your mortgage. However, if you don’t renew, your lender may automatically renew your mortgage at a higher rate.
2. How long does the mortgage renewal process take?
The mortgage renewal process usually takes a few weeks to a month, depending on how quickly you and your lender can come to an agreement.
3. Can I switch lenders when renewing my mortgage?
Yes, you can switch lenders when renewing your mortgage. Just make sure you understand all of the costs and fees involved in switching lenders.
4. Can I pay off my mortgage early during the renewal process?
Yes, you can pay off your mortgage early during the renewal process, but you may be charged a penalty fee for doing so.
5. What happens if my credit score has changed since my initial mortgage?
If your credit score has improved since your initial mortgage, you may be able to get a better rate when renewing. If your credit score has declined, you may have to accept a higher rate or less favorable terms.