A mortgage contract with a lender is valid for a limited period—technically referred to as the mortgage term. The period of a mortgage varies from one lender to another.
As long as you owe a balance, you’ll need to renew the contract for another term before your current mortgage term expires. The best part is that you’ll have the opportunity to assess and compare the rates and terms of your current mortgage with the opportunity. Then, you can sign up for the right deal fitting your financial goals.
If you want to stay with the current mortgage provider, simply sending a signed renewal slip will meet the purpose. But it’s suggested to take a proactive approach and make the best out of the available opportunity. Visit this link to read more about it.
For a seamless mortgage renewal, follow the process outlined below.
1. Start early for smooth and hassle-free mortgage renewal
Shop at least two months before the maturity of your current mortgage contract. The earlier you start, the better. Even if you have to renew the contract with the current lender, do so before the term is complete. Otherwise, you’ll have to bear a prepayment penalty. Besides, if you aren’t ready to settle the terms again with the current mortgage broker, you’ll have enough time to research the options.
2. Shortlist the best available options
Generally, lenders allow individuals to start with the mortgage renewal process four months before the maturity date of the current mortgage. So take advantage of this option and start looking for potential mortgage lenders. Compare the prepayment options, mortgage rates and terms of different lenders. Collect as much information as possible for negotiating the terms and conditions. Then, choose the lenders whose terms and conditions fit your unique requirements.
3. Determine your financial needs
There are high chances that your financial situation has changed over the years from when you signed your first mortgage contract.
When looking for a mortgage deal, consider the following aspects:
- Payment frequency
- Budget – an increase in income may allow you to clear off your debt sooner. You’ll have to bear less interest on a mortgage
- Whether you are satisfied with the terms and conditions of your current mortgage
- Other financial obligations due to critical illness, employment insurance, disability, etc.
- Consolidation of other debts with a higher rate of interest
All of the above may have a huge impact on affordability. Hence, it is important to determine your financial obligations and needs before choosing a mortgage deal that is suitable for you.
4. Discuss the terms with your current mortgage broker
According to the law, the current lender is liable for sending the mortgage renewal statement to the borrower 21 days before the expiry of the term. After that, they mail the renewal offer. By this time, you should have researched the best mortgage deals available.
Even if you haven’t, you’ll have plenty of time to do so and negotiate the terms with your lender. You should also schedule an appointment with other mortgage brokers to discuss interest rates and other terms and conditions.
There is a better chance of getting a mortgage at a discounted rate when negotiating the terms with the lenders. Discuss the offers provided by other mortgage brokers or financial institutions. However, you should have proper proof of the offers you are getting.
If you don’t take any action before the expiry of the mortgage term, your contract with the current lender will be renewed automatically. You’ll miss the chance of getting the lowest possible interest rate under the conditions fitting your needs. However, automatic renewal is possible only if mentioned in the renewal statement.
5. Fix the deal with the mortgage lender
Finally, you need to decide whether you’ll stay with your current mortgage provider or sign a contract with a new lender. It is assumed that by now, you must have selected the deal that will best suit your lifestyle and financial situation.
If need be, hire a mortgage broker. The professional will provide the necessary guidance to help you make the right decision. Plus, the expert may also help you in the next step of the process.
6. Complete the documentation and paperwork
If you decide to stay with the current lender, all you need to do is sign a copy of the contract renewal. In case you decide to switch to another lender, additional documents may be required to be submitted with the new lender, including the following:
- Income statement
- Statement copy property tax
- Copy of the current mortgage contract
- A void cheque for setting up payments
- Copy of your property insurance
Note that the documents required for mortgage renewal paperwork vary from one lender to another. Hence, it’s best to inquire about it with your lender.
7. Sign the documents
After all the above-listed steps have been completed, the details are forwarded to a signing company of Canada at the request of the new lenders. These organizations are responsible for facilitating the mortgage transfer from the current lender to the new one.
First, they request a discharge request or a payout statement from the current lender. Next, it allows them to determine the exact amount of mortgage needed to process the request. Finally, the mortgage documents are created, and then you’ll be contacted to sign them. Once all the formalities are completed, the transfer is scheduled accordingly.
If the mortgage contract is regulated by a bank or any federal financial institution, then the lender the renewal statement should be provided by the lender 21 days before the expiry of the current term.
A renewal statement should contain all the essential information such as the remaining mortgage principal, payment frequency, interest rate, mortgage term and any fees or charges that may apply. The lender also sends a mortgage renewal contract along with the renewal statement. However, it depends on your discretion to go ahead with the same lender or switch to a new one.