A Step-By-Step Guide To Renewing Your Mortgage in Victoria

As a homeowner in Victoria, you’ll usually have to renew your mortgage every few years. While it might seem like an extra headache you don’t really need; mortgage renewal also lets you shop around and find the best deals. 

Whether you’re new to mortgage renewals or a seasoned pro, this helpful guide will help you enjoy a stress-free process. 

When Should I Start Thinking About Renewing My Mortgage? 

Mortgages allow first-time buyers to climb the property ladder and help current homeowners upgrade to larger spaces. However, after signing up for a mortgage, there will come a time when you need to think about refinancing or renewing your current deal. 

In Canada, mortgages have two components: 

  • Amortization: The amortization period is the time it will take to clear your mortgage. Most mortgages have periods of at least 25 years. 
  • Term: Your mortgage’s term is the amount of time you have during your current agreement, which is an average of five years. 

When you enter into an agreement with your lender and the term ends, you can ask the lender for a new mortgage or find another provider. 

If your mortgage term ends, the lender will usually ask if you’d like to renew. This puts you in a great position because you can agree to new terms or search for a different provider. 

Best Tips For Renewing Your Mortgage

Before renewing your mortgage, it’s best to think about the terms you’re likely to be offered. Lenders have strict criteria to assess your financial situation, with your credit score and borrowing history being strong indicators of which rates you’ll receive. 

Here are some top tips for renewing your mortgage and securing the best possible deals. 

1: Decrease any outstanding debt and credit card balances

Proving your financial situation is stable is the most effective way to get the best rates from lenders. Outstanding debts and large credit card bills can impact your offers, but clearing those debts increases your credit score. 

If you have time to pay some – or all – of your debts, mortgage companies will give you better rates, which could mean you save money in the long term. 

2: Try to save up to make a lump sum payment

Some mortgage companies let their borrowers make lump sum payments, reducing the outstanding amount. For example, the new rates will decrease if you inherit some money and put some of that towards your mortgage. 

While some people find lump sum payments beneficial, it’s important to evaluate your financial situation and whether you have emergency savings available. 

Your rates might not decrease much with a lump sum, and the money could go towards other purchases. 

3: Start shopping at least up to 4 months before your term ends

There’s nothing worse than wondering what could have been and leaving your mortgage renewal to the last minute, which limits your options. Stay on track with the repayments, and begin shopping for new deals in advance. 

Giving yourself four months or more allows you to approach different lenders or work with a mortgage broker who has access to the best rates. 

Where Should You Renew Your Mortgage? 

Now for the most important part: where to renew your mortgage. The renewal itself is simple enough, but there are certain things to consider before making a decision, including: 

  • Interest Rates: Your mortgage interest rates could decrease or increase when your term ends. Moving to a new provider could save money, but your current lender might assure lower rates. 
  • Mortgage Type: You can also choose between fixed or variable rates. Fixed rates offer more stability, but variable-interest mortgages could save you money if the Bank of Canada’s base interest rate decreases. 
  • Frequency: Some mortgage providers offer flexible repayment terms, such as monthly or weekly. Finding a company that lets you change these payments can be a lifeline in times of financial stress. 

Renewing With Your Current Lender 

Sticking with your current lender makes sense if you don’t want to go through a new application process and pay any of the associated charges. 

However, mortgage providers know people will choose the convenient solution, so they don’t offer competitive renewal rates. The key thing to remember here is that the advertised rate in your renewal letter isn’t the final offer. 

Let your lender know you’re shopping around, and review their most competitive offer before making a decision. 

Shopping Around For The Best Lender Rates

Switching to a different lender could give you access to more competitive rates and better terms. However, it’s not a decision you should enter into lightly, as there’s still an application process and some associated charges. 

A new mortgage provider will review your financial situation, check whether there’s a history of debt and ask about your employment. If there’s a possibility for lower rates, going through the process could be beneficial. 

Opting for a mortgage broker makes your renewal easier. Brokers have access to a network of lenders and support you throughout the application. 

Mortgage Renewal FAQs

What factors can affect my mortgage renewal rates and approvals?

There are numerous factors that can affect your mortgage renewal options, including: 

  • Credit Score: Individuals with low credit scores won’t have as many choices, as lenders might view them as irresponsible borrowers. 
  • DTI: Your debt-to-income ratio also factors into the decision. Low DTI ratios show that your income outweighs your debt levels. 
  • Employment: Providing you’re employed or have a stable income gives you access to better interest rates. 
  • Equity: Lenders will view candidates with higher levels of equity favourably. 
  • Market Conditions: If you opt for a variable-rate mortgage, the economy and central interest rates can impact your options. 

Can a mortgage renewal be denied?

Yes, a mortgage renewal can be denied, with the above reasons playing significant roles in the decision-making process. However, it depends on your unique circumstances and whether the lender feels you’re a risk. 

Addressing your credit score and clearing outstanding debts is the best way to safe-proof your application. 

How often do I have to renew my mortgage?

The average mortgage renewal timeline is five years, but some people opt for shorter terms, while others might prefer stability with extended terms. Ask your current provider or new lenders about which agreements they offer and decide based on what suits your needs. 

Should I renew my mortgage for 3 years or 5 years?

There’s no set answer to whether you should opt for a three-year or five-year renewal. Let’s explore the pros and cons of each. 

3 year renewal pros: 

  • Can offer lower interest rates 
  • Best for people who might want to pay their mortgage off quickly 
  • You can look for different deals after the three-year mark. 

3 year renewal cons: 

  • You’ll have to go through the renewal process quicker.
  • Opting for a different provider means you’ll pay more fees.

5 year renewal pros: 

  • More stability with your payments. 
  • You might get lower interest rates. 
  • There’s no need to worry about renewals for at least four and a half years. 

5 year renewal cons: 

  • There might be fees associated with early repayments. 
  • Opting for fixed rates means you’re locked into a deal for five years. 

What’s the difference between mortgage renewals and mortgage refinancing?

Mortgage renewals mean you’re still within the amortization period but can stay with your current lender or find a new one. Refinancing means opting out of your standing contract and entering a new one. 

Mortgage refinancing is more complicated, but you can borrow more money, release some of the equity you’ve built, and change the amortization period. 

What’s happening with Canadian interest rates for mortgage renewals?

The Bank of Canada recently announced a .25% decrease in the overnight interest rate. 

While these rates can impact your renewal options, there’s every reason to believe that further economic stabilization will continue to result in better renewal options in the near future. 

How can I reduce my mortgage amount?

You can reduce your mortgage amount by making larger payments, contributing a lump sum or extending the term. The latter will only reduce your monthly contributions, but it can be beneficial if your financial situation is uncertain. 

Remember to weigh up your options before making a decision. While overpaying might seem beneficial, consider whether your financial situation will remain stable. 

Book A Consultation With a Victoria Mortgage Broker

Renewing your mortgage for the first time can be daunting, but knowing how to secure the best rates and approaching different lenders could reduce your monthly payments. 

If you’d like to explore your options, consulting with a mortgage broker gives you access to specialist lenders. We have an extensive network of lenders who work with people from all backgrounds. 

Whether your credit score is low or you have unique needs, our brokers go out of their way to find you the best deal. 

Please feel free to contact us with any questions or begin your application today.