Published on June 15, 2023 by Naureen Durack
6 mistakes to avoid when renewing your mortgage A mortgage can last up to 20 years or more, but is repaid according to a renewable term that you set jointly with your lender. At the end of a mortgage term, which can range from a few months to 5 years or more, you either pay off the remaining balance of your loan, or renew your mortgage for a new term. This renewal has a significant impact. It can change the way you manage your finances, as the amount of your repayments may increase or decrease, and the length of the term may shorten or extend. It all depends on the outcome of your negotiations with the lender, and whether they decide to renew the term with the same terms as the previous one, or to change them. Your lender may also simply refuse to renew. There are a number of things you need to know in order to successfully renew your mortgage, and certain mistakes you should avoid. Find out about them with your broker.
Renewing a mortgage is always an important operation. Signing a new term can change the way you manage your finances, so it's not a decision to be taken lightly. You have the choice between renewing your mortgage with the same lender, or shopping around and choosing another bank when conditions are more attractive.
Before making a decision, it's a good idea to have a clear picture of your finances and your ability to pay. There are several key factors to take into account: your income, your usual expenses, any debts you may have or other financial obligations, for example. Understanding them is essential to your decision-making process.
We recommend that you seek professional advice to help you consider all your options. In addition to information about your finances, knowing your credit rating is also essential for a successful mortgage renewal. Your mortgage broker or financial advisor can help you with this.
When renewing your mortgage, you are free to continue with the same financing institution or another of your choice. Shopping around is therefore advisable, as it may lead you to a lender offering better terms.
In Quebec, as in the rest of the country, while the key interest rate is the prerogative of the National Bank of Canada, mortgage lenders are free to set their own rates. For your renewal, don't hesitate to weigh up proposals from several banks, so as to sign up for the offer best suited to your situation and financial objectives.
You can, of course, stay with your current bank and argue for attractive terms.
Renewing your mortgage is an official act requiring your signature on a new contract. Like any new agreement, this one needs to be read carefully. So take your time and go through each element of your mortgage renewal agreement point by point. Keep an eye on the most important parts of the agreement. For example, the restrictive clauses set out in the contract should be read and understood before you sign, as should the rules applied in the event of an interest rate change or early repayment. This reading is an opportunity to learn the ins and outs of your agreement with the bank, but it can also encourage you to ask questions if there are elements in the agreement that need to be clarified.
Your mortgage renewal period is also a good time to find out about the various costs that may accompany certain operations linked to your contract. If, for example, you wish to make an early repayment in a few years' time, or change an option on your mortgage, what charges will apply? Take a close look at all the eventualities and find out about all the fees involved, including the renewal fee. This information can make all the difference, as each bank charges its own fees, and the differences from one lender to another can be considerable. Ignoring fees when renewing a loan can be detrimental to your decision-making process, and you run the risk of unpleasant surprises.
Your financial situation at the time of mortgage renewal is not the only factor to consider. For you, the success of this operation also depends on looking back at how your finances have evolved since you paid off your loan, their state at the time of mortgage renewal, and the future prospects linked to your financial objectives. Ask yourself a number of questions about your finances: has your household income increased since you signed your mortgage? Have your family expenses changed? Do you foresee a decrease or increase in your resources in the months or years to come? what are your medium- or long-term plans? A complete review of your past, present and future financial situation is essential. Take into account your earnings, expenses and debts, and don't forget to consider your future ambitions too. This will give you all the information you need to assess your future repayment capacity and choose the interest rate or term best suited to your situation.
Knowing the value of your property is essential. For a mortgage renewal, having a precise idea of the value of your property is vital. This information can be a powerful argument, as its value can influence your planned negotiations with a lender. As your home increases in value over time, renewal terms may become more attractive. The help of a professional appraiser to obtain an accurate estimate of your property's value is always beneficial when it comes to renewing your mortgage.
There are a number of key factors to consider when renewing your mortgage. This decisive moment in the repayment of your loan should be carefully anticipated. Not thinking about your current financial situation, neglecting to store around and failing to check the terms and conditions of the new term are mortgage renewal mistakes to be avoided. Also, be aware of the fees that will accompany the renewal and, above all, remember to take into account your long-term needs and the value of your property. Professional help is the key to a successful mortgage renewal. Your mortgage broker can help you with all these points.
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