Mortgage Blog
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Negotiating a Better Renewal Rate
October 16, 2025 | Posted by: Jatinderbir Singh Bajwa
Renewing your mortgage is a critical financial decision that can significantly impact your monthly budget and long-term financial health. With mortgage renewal rates fluctuating and various options available, negotiating a better renewal rate can save you thousands of dollars over the life of your loan.
How Does Mortgage Renewal Work?
Mortgage renewal is the process of signing a new mortgage contract with your lender for another term once your current mortgage term ends. This involves selecting new terms and conditions, including the mortgage interest rate, term length, and payment schedule that best suits your financial situation.
When your mortgage term ends, your lender will typically send a renewal offer several months in advance. This offer will outline the new terms and rates available to you. While you can accept this initial offer, doing some research and negotiation can often lead to better rates and terms. During the mortgage renewal period, you can negotiating a better renewal rate to save on interest payments over the next term.
The renewal process generally begins about 120 days before your current mortgage term expires. This is a window during which you can evaluate your financial situation, research current mortgage renewal rates, and shop around for competitive offers from other lenders. If you find a better deal elsewhere, you can consider switching lenders.
Do Banks Check Credit for Mortgage Renewal?
Banks may check your credit score during the mortgage renewal process, which can help when you’re negotiating a better renewal rate, although it is not always mandatory. A good credit score can qualify you for more favourable rates, while a poor score might limit your options or result in higher interest rates. Being proactive about your credit health gives you a stronger position to negotiate your mortgage renewal terms.
What Happens If You Don’t Renew Your Mortgage?
In Canada, failure to renew typically results in conversion to an open mortgage, which permits repayment without penalties but usually comes with comparatively higher interest rates than closed mortgages. Transitioning out of an open mortgage requires waiting for the next month's effective rate, which may increase interest expenses.
- Can a Bank Deny Mortgage Renewal in Canada?
Banks may deny renewal for several reasons, including significant declines in credit status, income reduction, or violation of mortgage terms. Well-qualified applicants typically receive renewals, but adverse changes can prompt denial.
What Happens If Your Mortgage Renewal Is Denied
If denied, contact your lender to understand the reasons, which helps address concerns and improve future applications. Recommended actions include:
- Improve credit score by managing debt, correcting credit report errors, and maintaining timely payments.
- Explore refinancing possibilities with alternative lenders who may have broader criteria.
- Consult a mortgage broker for access to additional lending sources.
- Consider obtaining a co-signer if credit remains a challenge.
- If unable to renew or refinance, selling your property might be necessary to avoid foreclosure.
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How to Negotiate a Better Mortgage Renewal Rate!
Negotiating mortgage renewal rates can affect total loan costs. Consider these approaches:
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1.Start the renewal process early to allow time for research and negotiation.
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2.Review your credit report before renewal.
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3. Use a mortgage renewal calculator to estimate outcomes under various scenarios.
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4.Assess different mortgage options based on financial objectives and risk tolerance.
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5.Negotiate directly with the lender, as initial renewal offers may be improved.
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6.Seek competitive quotes from other institutions to aid negotiation.
Preparing for Mortgage Renewal
Approaching mortgage renewal may involve adjustments to interest rates and financial conditions, referred to as “mortgage renewal shock.” Higher rates could increase monthly payments; planning ahead and seeking professional advice is recommended to navigate any financial challenges.
