How early can you renew your mortgage?

If you owe money on your mortgage loan when your term is up (and most of us will!), you'll need to renew your mortgage for another term. When renewing your mortgage, you'll also have the ability to lock in a new rate and terms. 

If rates have declined since you locked in a rate—it's a time to celebrate because you can hopefully renew at a lower interest rate. However, rates at the start of 2023 are currently sitting higher than they have in more than a decade. So what do you do if it's time to renew, and how early can you renew your mortgage? You have some options. 

How do mortgage renewals work? 

A typical mortgage term in Canada is typically about five years, but it can vary depending on the lender. For example, some mortgage terms can last as short as a few months, while others can last up to 10 years. When your mortgage term is complete, and you're not at the end of your amortization period or haven't paid your mortgage off, you will need to renew your mortgage for another term. 

Your mortgage term represents the length of time your mortgage contract is in effect and outlines terms and conditions like your interest rate, the type of mortgage (fixed or variable), and the fees associated with the contract—like prepayment penalties. 

You can choose to renew with your existing lender or switch to a different one. But as long as you've made your payments on time, you should find it pretty simple to renew with your existing lender. While choosing to renew with your current lender may be convenient, it’s in your best interest to shop around to see if you can get a better interest rate or prepayment fees with a new lender. 

How early can you renew your mortgage? 

It all depends on your lender. Most lenders will allow you to renew your mortgage as early as 120 to 150 days before maturity. Plus, if you decide to renew early, your lender may waive any prepayment charges. 

If mortgage rates are lower than what you currently have, renewing early is an attractive option because it allows you to lock in early at a better rate. If new rates are higher than what you're paying, you may want to wait to renew—unless you think that rates may be increasing again in the future.

Either way, it's definitely worth it to shop around and see what kind of mortgage rates are available with different lenders. But keep in mind that a renewal typically takes about 30 days to process, so give yourself enough time to get your paperwork together. 

Things to consider before renewing your mortgage with your current lender 

Before you decide to renew your mortgage contract, you'll want to consider these factors: 

• Do you have the funds to pay your mortgage sooner so you can save on interest?
• Are you happy with your current provider? 
• Are you looking to change your frequency of payments? 
• Can you make additional payments without penalty, and if not, do you want this ability? 
• Are you satisfied with the interest rate you're being offered? 
• Are you looking to consolidate other debts and increase your mortgage loan? 

These are all important questions to think about when deciding to renew your mortgage with your current lender. If you’re unhappy, now is the time to shop around because you typically won't have to pay the same penalties as you would if you were breaking your mortgage term early. However, every lender is different, so check with yours to ensure you won't face any unpleasant surprises if you do decide to switch. 

Things to consider when switching your mortgage at renewal time 

If you've decided to switch to a mortgage lender with a lower interest rate to save money over your new mortgage term, there are a few potential fees to be aware of when switching. First and foremost, be sure that your new lender is upfront and transparent about fees and isn't making promises they can't keep. Here are the most common fees affiliated with switching: 

• Mortgage discharge fee: A fee to end your existing mortgage agreement. It can cost anywhere from 0$ to $400, and your mortgage contract should state how much it is. 
• Appraisal fee: Typically costs between $150 and $500 to have the property's value assessed. Although you paid an appraisal fee when you first bought the home, unfortunately, you may need to go through the process again when switching lenders. 
• Assignment fee: Covers the administrative work from your old lender to switch to your new lender and can cost anywhere from $5 to $400. 
• Legal fees: A lawyer is needed to complete the switching process, so the legal fee will depend on the type of mortgage you have. 

As an incentive to switch at renewal time, your new lender may waive or cover some of these fees, which could save you hundreds of dollars. Talk to the lender you're considering switching and see if they can hopefully make it more lucrative to switch. 

The bottom line 

Whether you're renewing with your current lender or switching to get a lower rate, it never hurts to get a second opinion. If you have any questions about making a switch, a mortgage agent would be happy to answer any questions you may have.