5 Mistakes to Avoid When Renewing Your Mortgage

Mortgage renewal time is one of the biggest financial opportunities most Canadians overlook. Every year, thousands of homeowners simply sign and return their lender's renewal letter without shopping around — leaving thousands of dollars on the table. Here are the five most common mistakes to avoid.

1. Signing the Renewal Letter Without Shopping Around

This is by far the most common and costly mistake. When your lender sends you a renewal offer, it's rarely their best rate. They're counting on the fact that most people will take the path of least resistance and sign without comparing options.

The reality is that switching lenders at renewal is straightforward and often free. Even if you don't want to switch, having a competing offer gives you powerful leverage to negotiate a better rate with your current lender.

2. Waiting Until the Last Minute

Most lenders send renewal offers 21 days before your term expires. That's not enough time to properly shop around, get approvals, and make an informed decision.

Start exploring your options at least 120 days before your renewal date. Many lenders will offer rate holds that lock in today's rate for up to 120 days, protecting you if rates go up while giving you time to compare.

3. Only Looking at the Interest Rate

While the rate is important, it's not the only factor. Pay attention to:

• Prepayment privileges: Can you make lump-sum payments or increase your regular payments without penalty?
• Portability: Can you transfer your mortgage if you move?
• Penalty calculations: How does the lender calculate penalties if you need to break the mortgage early?
• Blend-and-extend options: Can you blend your current rate with a new rate if you need to refinance mid-term?

4. Not Considering a Different Term Length

Just because you had a 5-year fixed doesn't mean you should renew into another 5-year fixed. Your financial situation and the rate environment may have changed.

If you're planning to sell within a couple of years, a shorter term could save you from paying a hefty penalty. If rates are low and you value stability, a longer term might make sense. Consider all your options before deciding.

5. Forgetting to Review Your Overall Mortgage Strategy

Renewal is the perfect time to take a step back and assess your broader financial picture:

• Has your income changed? You might qualify for better terms.
• Do you have high-interest debt? A refinance could consolidate it at a much lower rate.
• Has your home value increased? Your improved equity position could get you a better rate.
• Are you on track with your amortization? Adjusting your payment frequency could save thousands in interest.

The Bottom Line

Your mortgage renewal is not a formality — it's an opportunity. Taking a few hours to compare rates and review your options could save you $10,000 or more over your next term. Don't leave that money on the table.