Every mortgage term eventually comes to an end. For most BC homeowners, that moment arrives every five years, and it presents one of the most significant financial opportunities you will encounter as a homeowner. Yet the vast majority of Canadians simply sign the renewal letter their bank sends them and mail it back without a second thought.
That convenience comes at a cost—often thousands of dollars over the next term. Here is what you need to know to approach your mortgage renewal like an informed borrower.
What Actually Happens at Renewal
When your mortgage term expires, the outstanding balance does not disappear. Your lender will send you a renewal offer, typically 21 days before your maturity date, with a proposed rate for a new term. If you sign it, your mortgage continues seamlessly. If you do nothing, most lenders will automatically roll you into an open mortgage at a significantly higher rate until you decide on a new term.
The key thing to understand is that a renewal is functionally a new mortgage negotiation. The slate is clean. You owe nothing to your current lender in terms of loyalty, and they know it. This is your leverage.
The 120-Day Rule
Most lenders allow you to begin the renewal process up to 120 days (four months) before your current term expires. This is important for two reasons.
First, you can lock in a rate up to 120 days in advance. If rates are favourable right now, you can secure today's rate and still benefit if rates drop further before your renewal date—most lenders will honour the lower rate.
Second, 120 days gives you enough time to shop the market properly. If you wait until the last minute, you lose your negotiating power and may feel pressured to accept whatever your current lender is offering.
Your Bank's First Offer Is Rarely Their Best
Banks are businesses, and their renewal offers reflect that reality. The rate on your renewal letter is almost never the most competitive rate available. It is a starting point—a number the bank hopes you will accept without questioning.
Many homeowners assume that because they have been a loyal customer for years, the bank is giving them a fair deal. In practice, new customers often receive more competitive rates than renewing ones. The bank's retention department has room to negotiate, but only if you push.
On a $500,000 mortgage, even a 0.25% rate improvement saves you approximately $6,250 over a five-year term. That is real money sitting on the table if you simply sign and return.
Switching Lenders at Renewal
One of the most under-appreciated facts about mortgage renewals is this: you can switch lenders at renewal with zero penalty. When your term matures, you are free to move your mortgage to any lender offering better terms. The new lender typically covers the legal and transfer costs, especially on standard switches.
Switching is not always necessary. Sometimes your current lender will match or come close to what the market offers, especially when they know you are shopping. But having a genuine alternative gives you leverage that you simply do not have if you only speak to one institution.
A mortgage broker like Ajay can submit your file to multiple lenders simultaneously, giving you real competing offers rather than a single take-it-or-leave-it letter.
Rate vs Term: Think Strategically
Renewal is also an opportunity to reconsider your term length. You do not have to renew into another five-year fixed simply because that is what you had before. Depending on the rate environment, a shorter term (2- or 3-year fixed) or a variable rate might save you money or position you better for the future.
Consider your life plans over the next few years. Are you thinking about selling, relocating, or renovating? A shorter term gives you more flexibility. If stability is your priority and you plan to stay put, a longer term with a solid rate can provide that certainty.
How a Mortgage Broker Helps at Renewal
A mortgage broker's service at renewal costs you nothing as a borrower—the lender pays the broker's compensation. Here is what Ajay does for renewal clients:
- Reviews your current mortgage terms and identifies any features worth keeping (such as prepayment privileges or portability)
- Shops your renewal across 40+ lenders to find the most competitive rate for your profile
- Presents you with multiple options—including your current lender's best counter-offer—so you can make an informed decision
- Handles the paperwork and coordinates the transfer if you decide to switch
- Advises on term length and rate type based on your goals and the current market
Common Renewal Mistakes to Avoid
- 1.Signing the renewal letter without negotiating.
This is the single most common mistake. Always shop around or at minimum call your lender and ask for a better rate.
- 2.Waiting until the last minute.
Starting 120 days early gives you maximum leverage and rate protection. Waiting until one week before maturity leaves you with no options.
- 3.Ignoring the fine print.
Prepayment privileges, portability, and penalty structures can vary significantly between lenders. A slightly lower rate might come with restrictive terms that cost you more in the long run.
- 4.Assuming you cannot switch.
Many homeowners believe switching lenders is complicated or expensive. At renewal, it is often free and straightforward.
- 5.Focusing only on rate and ignoring term strategy.
The lowest five-year rate is not always your best option. Consider your timeline, plans, and the rate curve before committing to a term.
Your mortgage renewal does not have to be stressful, and it certainly should not be a missed opportunity. With a little preparation and the right guidance, you can ensure that your next term works as hard for you as possible.
Renewal coming up? Contact Ajay at least 120 days before your term expires to get started.