Renewing Your Mortgage? Read This First

If you’re one of the millions of Canadians who are renewing mortgages soon, follow these five tips to get the best deal possible from a lender.

By Josh Sherman | 4 minute read

Getting the lowest rate is a priority for many Canadian mortgage borrowers, but there’s much more to consider, experts say.

Millions of Canadians are renewing their mortgages in the coming years.

In fact, a Royal LePage survey released towards the end of 2023 suggested that 74 per cent of Canadian mortgage holders were up for renewal within 18 months. That works out to 3.4 million Canadians.

When these borrowers do renew, many will be facing significantly higher interest rates.

That’s causing a lot of stress for borrowers, suggests Frank Napolitano, mortgage agent and co-founder of Mortgage Brokers Ottawa. “They’re concerned, and they’re nervous,” says Napolitano.  

Fortunately for Canadians with mortgages, there are a number of steps they can take to try and secure the best loan possible upon renewal. Wahi spoke to mortgage experts to find out how and received the following tips. 

1. Don’t accept the first offer.

“First off, don’t rush into the first offer you see,” Lauren van den Berg, president and CEO of Mortgage Professionals Canada, the national group representing the mortgage industry, tells Wahi.

Napolitano agrees. He says you should check out the competition before you decide to stay with your current lender — let alone accept the first offer. “Everyone should shop their mortgage,” he advises. “People will go three blocks and save three-tenths of a cent on a litre of gas… but they won’t do the same thing on their mortgage, which absolutely drives me bonkers,” he continues.

There’s a good chance that your lender’s first offer won’t be the best, suggests Napolitano, who speaks from experience. (For the better part of a decade, he was a loan officer for one of Canada’s Big Five banks.)

2. Consider professional help.

“When you’re in the market for a mortgage, finding the right interest rate is crucial, but it can also feel overwhelming,” says van den Berg. Working with a mortgage broker can help ease your burden. They’ll be doing the heavy lifting, comparing rates and finding the best options for your particular needs. “Unlike bank loan officers who are limited to their institution’s own products, mortgage professionals have access to a wide range of loans from multiple lenders,” van den Berg explains.

3. Start shopping around ASAP. 

Timing is crucial. “Starting early is an important step and a strategic advantage to locking in the best mortgage at renewal time,” Bekim Merdita, executive vice president of Rocket Mortgage Canada, tells Wahi. 

Having more time means you won’t have to rush to make a decision. You’ll be able to consider all the options and drive a harder bargain. “Secondly, you don’t need to worry about locking in early then rates going down later because the majority of lenders have ‘float-downs’ available,” Merdita explains. This float down means that if rates fall while your mortgage is being processed, your lender typically honours the new lower market rate. “Therefore, [starting] about 120 days before renewal time is a win-win,” says Merdita.

4. Don’t over-fixate on the rate.

Getting a competitive rate is key, but it’s not everything. “Many people focus solely on getting the lowest interest rate, but it’s equally important to consider what aligns with your financial situation and lifestyle,” says van den Berg.

The current market is a prime example of why you shouldn’t be entirely fixated on obtaining the lowest rate, suggests Napolitano. To get the lowest rate on the market today, you’d need to lock into a five-year fixed-rate mortgage. But with most experts predicting interest rates will continue to fall in the coming years, signing on for a longer-term mortgage could mean more than you need to in the long run. “If you’re focused on just getting the lowest rate… you might be disappointed,”  Napolitano cautions.

A higher rate today on a variable-rate mortgage, where the amount you’re paying towards the principal increases as the Bank of Canada’s overnight rate declines, or an adjustable-rate mortgage, where payments immediately fluctuate in response to central bank rate decisions, could save you money in the long run.

“That’s not to say everybody needs to go on an adjustable or variable rate,” Napolitano adds. “There are people that are extremely nervous to be in a product that has fluctuations attached to it.”

5. Make sure your finances are in good order. 

Money — and credit — talk. “If you’ve got good credit, then you’re attractive to most lenders,” says Napolitano. “If you keep your credit clean, then all of a sudden you’ve got lenders that are going to fight to get your business, and therefore you’re going to get a better rate and better options,” he adds.

Whatever you do, warns Napolitano, don’t miss a mortgage payment. Most lenders will allow you to skip a month’s payment if you give advance notice. If that doesn’t work, and you have mortgage insurance, approach your insurer.

In extreme cases, where a renewal is imminent, consider taking on short-term debt. Use your credit card or a line of credit to make your remaining payments before renewal. “Once you miss a mortgage payment or two, it’s extremely difficult to get to top pricing for your renewal at that point,” Napolitano says. “It takes away some of my negotiating power on your behalf.”