Renewing Your Mortgage? Here’s What You Should Consider

Your situation as a homeowner can change over time. Major shifts like switching jobs and expanding your family can lead to the desire to not only renew but change your mortgage terms. 

It’s not just major changes to your life that can inspire new terms though. Your contract could simply be coming up. Likewise, home owners are often looking to find ways to increase the value of their home over time, which can result in the need for new terms. 

Whatever your reasoning, whether it be time or circumstance, renewing your mortgage doesn’t have to be challenging.

What does it mean to renew your mortgage?

When you set up your initial house mortgage with a lender, that contract is valid for a specific period of time.

This period of time is called the mortgage term, and it can range from a few months to five years, or longer in some cases. After that initial term comes to an end, you can either pay off your mortgage in full or renew the loan.

Most homeowners opt to renew their mortgage and, during this process, it’s a good time to ensure that you have the right mortgage for you and your situation. Renewing your mortgage doesn’t simply mean signing the same contract again; it gives you an opportunity to revisit your rate, terms, and overall features of the loan.

How to find the right mortgage for you

When it’s time to renew your mortgage, it’s time for you to evaluate your current contract. Before you start signing on any dotted lines, you want to make sure you have the best set-up for you. 

When renewal time comes, it’s worth it to consider:

• Budget — has your budget increased since your initial contract? Making larger payments can allow you to pay your loan off sooner and save on interest.
• Type of mortgage – there are many factors to consider here. Are you looking to move within the next few years? If so, you may want a mortgage with more flexibility.
• Payment frequency — does your current payment frequency work for you? Are you likely to make additional payments throughout the term? A great tip to make paying your mortgage a bit easier: schedule your payments to coincide with when you get paid.
• Other debts — do you have other debts that you might want to combine? It might be possible for you to consolidate other debts with higher interest rates and increase the amount of your mortgage, saving you money in the long run. 
• Big projects – are you planning a home renovation or will you be needing additional funds? 
• Insurance — renewal is a great opportunity to review your insurance needs as well. Are you interested in adding life, critical illness, disability, or employment insurance on your mortgage?

Tips for renewing your mortgage

Once you’ve figured out what you need your mortgage to look like, it’s time for you to start searching for the right deal for you. But before you sign on the dotted line, consider these four tips:

Give yourself time

Don’t wait until the last minute to renew your mortgage; give yourself time to find the right contract for you. Most experts recommend that you start shopping around at least 120 days, or four months, before the renewal date. The more you prepare, the better position you’ll be in when it comes to signing the contract. 

Pay a lump sum to your principal

There are no pre-payment limits on your mortgage renewal, which means it’s the perfect time to pay a lump sum towards the loan. Paying a larger sum now can help you save money in the long run. 

Mortgage Renewal FAQs

Can an early mortgage renewal get me a better rate?

An early mortgage renewal can mean securing a better interest rate for your next mortgage term if it looks like rates will be increasing soon. But securing the best rate depends on the current market.

Can I change the terms of my mortgage with an early renewal?

Yes, you can change the terms of your mortgage any time you’re renewing, early or not.

When you renew, you’re negotiating an entire new home mortgage. That means you should look at the mortgage term, features, and rate, just like you did when you secured the original mortgage.

Will I be breaking my mortgage if I accept an early renewal offer?

No, accepting an early renewal offer does not break your mortgage, so long as you keep it up until the last 120 days of your term. That means, if you’re within that window, you won’t need to pay a penalty.

What is the prepayment penalty for breaking my contract?

Your prepayment penalty is unique to your mortgage contract. However, if you are signing an early renewal up to 120 days before your current term expires, you should not have to pay a prepayment penalty.

Take the Next Step Toward Renewing Your Mortgage

GarbageDay is owned and operated by RBC Ventures, a subsidiary of RBC Royal Bank, and we’re thrilled that they believe in our vision! At RBC Ventures, we’re going beyond banking to solve problems and transform the way you live your life. When it comes to anything related to your mortgage, we highly recommend existing RBC customers to Check In with a Royal Direct® representative by phone, 24 hours a day, 7 days a week. For non RBC customers, contact a Mortgage Specialist to get started. You will receive honest guidance and support regarding your options.