When your mortgage is up for renewal, it's important to take the time to carefully review your current loan and consider all of your options before making a decision. Here’s what you should do when your mortgage is up for renewal.

The first step when your mortgage is up for renewal is to review your current mortgage terms. Take a close look at your interest rate, payment schedule, and any other conditions that may affect the overall cost of your mortgage. This will help you understand if there are any changes or improvements you would like to make during the renewal process.

For example, if you have excess cash, you may want to make additional payments towards your principal amount to pay off your mortgage faster. At mortgage renewal, you can make lump-sum mortgage prepayments without any mortgage penalties from your lender. You may also want to consider increasing your regular mortgage payments or making extra payments.

Or, if you anticipate a change in your income or expenses, you may want to consider extending your amortization period for lower monthly payments. To do so, you’ll need to refinance your mortgage instead.

Once you have reviewed your current mortgage terms, it's important to explore all of your renewal options. This includes researching and comparing mortgage renewal rates from different lenders, negotiating new terms with your current lender, or even considering switching to a different type of mortgage. For example, if you need to borrow more money or you want to reduce your payments with a longer amortization, you might need to consider a mortgage refinance. Another thing to compare is whether you want to go with a fixed or variable rate mortgage.

While your mortgage’s amortization will remain the same when renewing, unless you have a variable mortgage rate that causes interest to accumulate or you refinance your mortgage, you can change and renew into a different mortgage term length each time your mortgage is up for renewal. If you are at the end of a 5-year mortgage term, you don’t have to renew for another 5-year term. Instead, you could choose to change to a 1-year term or even a 10-year term.

Taking a look at a mortgage rate forecast can help you decide what term length to choose. If it’s expected that rates will significantly rise, you might want to lock-in a rate for a longer-term now while rates are lower. The opposite is true as well, if rates are expected to fall, you may want a shorter-term mortgage so that when your term is up for renewal again, the lower rates will be available to you.

You might also want to consider changing your mortgage payment frequency. Making more frequent payments, such as through accelerated bi-weekly or weekly payments, can significantly reduce your mortgage interest costs.

If you decide to renew with your current lender, it's important to negotiate new terms that are favorable for you. While your lender will offer you a rate in your mortgage renewal statement, you can always try to negotiate for a lower interest rate. A mortgage broker can also help compare rates with different lenders and may help you to switch lenders if another lower rate is available. There may be additional costs for switching to another lender, such as mortgage discharge and registration fees.

Once you have reviewed and negotiated your mortgage renewal terms, it's time to sign the renewal agreement with your lender. It's important to carefully read through the agreement and make sure all of the terms are accurate and align with what was discussed during negotiations. If there are any discrepancies or concerns, be sure to address them with your lender before signing the agreement.

Since you’re renewing your mortgage rather than applying for a new mortgage, you won’t have to go through as rigorous of a process as when you first obtained your mortgage. You won’t need to pass themortgage stress test again, and some lenders may even have your mortgage renewed automatically if you don’t take any action to switch lenders at renewal.

However, a mortgage renewal isn’t guaranteed. Your lender may deny your mortgage renewal if your financial situation has significantly deteriorated. In that case, you’ll need to switch lenders, or even consider a B-lender orprivate mortgage lender.

Source: Bank of Canada, Statistics Canada’s Survey of Non-Bank Mortgage Lenders, and CMHC estimate

WOWA.ca analysts conducted research to find the percentage of mortgage renewals and refinances done with the same lender versus those done with a different lender (switch lenders) for insured versus uninsured mortgages from 2019 to 2023 in Canada. WOWA found that insured mortgages make up a smaller portion of the market, decreasing from 30% of the total mortgage market in 2019 to 19% of the market in 2023. Uninsured mortgages dominate the Canadian mortgage market, making up 70% to 81% of all mortgages in 2019 and 2023.

WOWA also found that most mortgage renewals and refinances in Canada happen with the same lender. However, insured mortgages see the highest retention rate, with 94% of insured mortgage borrowers renewing/refinancing with the same lender in 2023. In comparison, only 91% of uninsured mortgage borrowers remained with the same lender. One reason for this is the stricter qualification requirements for switching lenders with an insured mortgage. That's because if an insured borrower wants to switch lenders, they have to requalify under Canada’s mortgage stress test rules. On the other hand, uninsured mortgages do not have to undergo the stress test again, making switching easier.

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During your mortgage renewal process, you can expect to receive a mortgage renewal statement from your lender. This will outline the terms of your current mortgage and any options for renewing or changing these terms.

You'll receive a renewal letter from your lender at least 21 days before your mortgage term is set to expire. You may receive this letter by mail or electronically, depending on how you have set up communication with your lender.

It's important to carefully review this statement and pay attention to any changes in interest rates or terms. The renewal statement will include:

• The remaining principal amount
• Interest rate
• Payment frequency
• Term length
• Any charges or fees

Your renewal statement may also come with a mortgage renewal contract for you to sign and return if you agree with the new terms offered by your lender.

The offer in your mortgage renewal statement may include changes to your current interest rate or other terms. It's important to carefully review these changes and understand how they will impact your mortgage payments and the cost of your mortgage.

Some potential changes you may see are:

• Interest rates have increased or decreased
• Your payment frequency has changed
• Your prepayment limits have changed or there is a different prepayment structure
• Your term length has changed

You may also use this opportunity to renegotiate or negotiate new terms with your lender that better suit your needs.

If you are not satisfied with the renewal offer from your current lender, it's important to explore other options if negotiating with your lender doesn’t result in a rate that you’re satisfied with. You may consider switching lenders or refinancing your mortgage with a different lender who can offer more competitive rates and terms, and using a mortgage broker who can negotiate rates on your behalf.

It's also important to keep in mind that you don't have to wait until your mortgage term is up to seek alternative options. You can start exploring and negotiating with other lenders at any time to find the best mortgage terms for your financial situation. If you find a low enough rate, you may even want to consider breaking your mortgage early and refinancing, if it makes sense to do so after paying mortgage prepayment penalties. Refinancing rather than renewing also allows you to borrow more money using your home’s equity, giving you access to cash at a relatively low interest rate compared to other loan options.