Your Renewal Is Coming: What to Do Before You Sign

Near the end of your mortgage term, your lender will send a renewal offer. It often comes with a form that's quick to sign and return, and many people do exactly that. There's nothing wrong with renewing where you are, but the offer is a starting place, and you have more choices at renewal than at almost any other time.

An offer, not an obligation

When a term ends, the contract that set your rate and conditions ends with it. You can accept the lender's offer, ask whether it can be improved, change the type or length of the term, or move the mortgage to another lender. Moving usually means a new application, and the new lender will look at your income, credit and property under the rules in place at the time. There may be costs to switch, and sometimes they're covered, so ask.

If you do nothing, what happens depends on your lender and your contract. Some mortgages renew automatically into a term you didn't pick, which is a good reason to read the offer closely and note its deadline.

Start the conversation early

Time is the most useful thing to have at renewal. Starting a few months ahead leaves room to gather documents, ask questions and compare without a deadline pressing on you. Some lenders allow an early renewal within a set window before the term ends; the details vary by lender.

What has changed since last time

The mortgage you chose at the start of this term suited your life then. It's worth a few minutes to think about what's different now:

• your income, your household or your other debts
• plans to move, renovate or buy another property during the next term
• savings you might put against the balance, since renewal is typically a time when you can pay down principal or change your payment without a prepayment charge
• how much rate movement you're comfortable living with

What to compare besides the rate

• Prepayment privileges. How much extra you can pay each year, and how, without a charge.
• Portability. Whether you can take the mortgage with you to a new home, and on what conditions.
• The charge for leaving early. How the prepayment charge is calculated if you break the term. Methods differ between lenders and between fixed and variable rates, and the difference can be large.
• The type and length of term. Fixed or variable, shorter or longer, and how each fits your plans.

A lower rate with conditions that don't fit your plans isn't always the lower-cost choice in the end. Which combination suits you depends on what the next few years are likely to hold, and that's your call to make.

If your renewal is coming up and you'd like to go over the offer and your options together, we'd be glad to hear from you.