Mortgage renewal모기지 갱신 (리뉴얼)

What is it?

You pay a mortgage off over 25 or 30 years (the amortization), but the contract with your lender usually lasts one to five years (the term). The day the term ends is the maturity date.

If there is still a balance at maturity, you must do one of three things: pay it off, renew with the same lender for a new term, or switch the mortgage to another lender.

A renewal is not a new mortgage. The balance and the remaining amortization stay the same; only the rate, term and payment options are set again. Because it happens at maturity, there is no prepayment penalty.

The renewal statement: the 21-day rule

If your mortgage is with a federally regulated financial institution, such as a bank, the federal Bank Act and its regulations set these rules.

• The lender must give you a renewal statement at least 21 days before the end of the term, on paper or electronically if you have agreed to that.
• The statement holds the same kind of information as your current agreement: the balance at the renewal date, the rate, payment frequency, term and any fees. It may be combined with a renewal agreement.
• Between the day the statement is sent and the renewal date, the lender cannot change the agreement in a way that increases your cost of borrowing.
• The renewal does not take effect until 21 days after you receive the statement, and your rights under the old agreement continue until then. If the statement arrives late, you still get that time to think.
• If the lender decides not to renew your mortgage, it must tell you at least 21 days before the end of the term.

Credit unions are regulated by Ontario, not by these federal rules, so their notice rules can differ. Check your contract or ask the credit union.

Step by step

1. Four to six months before maturity: confirm your balance, maturity date and remaining amortization. Many lenders let you renew early without penalty within a window before maturity (often a few months), but the window differs by lender.
2. Rethink what you need: higher payments to finish sooner, bi-weekly payments, fixed or variable, prepayment privileges, and whether you may sell within a few years.
3. Collect offers: your current lender, other banks, and a mortgage broker who deals with several lenders. FCAC advises not to wait for the renewal letter but to start shopping a few months ahead.
4. Negotiate with your current lender. Tell it about other offers and ask whether you qualify for a discounted rate. The rate in the letter is often the pre-negotiation rate.
5. If you switch, get approved by the new lender, find out how much of the switching costs (below) it will cover, and finish the paperwork before maturity. You may need a lawyer.
6. If you do nothing, the lender may renew you automatically on its own terms. FCAC warns that you may then not get the best rate and conditions.

Switching to another lender

You do not have to renew with the same lender. If the terms are better elsewhere you can move, and the new lender approves you on a new application. FCAC lists these possible costs of switching.

• Fees to discharge the old mortgage and register the new one.
• A transfer or assignment fee from your current lender.
• An appraisal fee to confirm the value of your home, if needed.
• Other administration fees. Ask whether the new lender will pay some or all of these costs.
• If your mortgage is insured (CMHC and others), no new premium is needed unless you increase the amount or extend the amortization. Tell the new lender that insurance is already in place.
• A mortgage registered as a collateral charge is harder to move. You will likely pay discharge and registration fees, and the current lender can require you to pay off other debts tied to the same charge, such as a line of credit. Ask your lender or lawyer in advance how yours is registered.

Is there a stress test at renewal?

Even without the stress test, the new lender reviews your income, debts and credit. If your income fell or your debts grew, switching may be hard, and renewing with your current lender is the safer path.

Renewal vs refinance vs early renewal

If rates have dropped and you want to break the term early, check whether the penalty is bigger than the savings. See "Prepayment penalty".

Example

Things to watch

• Do not let it renew automatically. The rate in the letter is often the pre-negotiation rate, and the term or conditions may not suit you.
• Look beyond the rate: prepayment privileges, porting (taking the mortgage to your next home), the penalty method (three months’ interest vs IRD) and payment frequency.
• If you may sell within a few years, a long fixed term carries penalty risk. Consider a shorter term, an open mortgage or a good porting clause.
• Stretching the amortization again at renewal (for example, the remaining 20 years back to 30) is a change that needs a new review, and an insured mortgage cannot go beyond the regulated limit.
• Ask a mortgage broker up front how they are paid (by the lender or by a fee from you). FSRA says a mortgage brokerage may charge an up-front fee or retainer for loans above $400,000. A broker may not automatically check your current lender’s best offer, so ask your current lender yourself. In Ontario, brokers and agents must be licensed by FSRA.
• If the paperwork is not finished by maturity, you may roll into the current lender’s terms. If you are switching, get the approval and signatures done weeks before maturity.