With more that 1 million Canadian’s holding a mortgage that is up for renewal in 2025 you may find yourself in the middle of a significant financial decision. One that can impact your future payments and overall financial health.
As a real estate agent, I often get asked about mortgage renewals and whether homeowners should stay with their current lender or explore other options. So, I thought I’d post a few thoughts on the process.
There’s a lot to consider, including;
- Recent changes to the mortgage stress test.
- The challenges of switching lenders.
- The benefits of staying with your current lender.
- The benefits of switching your lender.
Let’s take a closer look at each of these!
Goodbye To the Stress Test
This is one of the biggest changes to the process of renewing a mortgage and what a welcome relief! Starting in 2025 there is no more stress test when renewing your mortgage with a new lender. Previously, borrowers had to requalify under the stress test, which made it difficult to switch lenders and find better rates.
Challenges of Moving to a New Lender
While the removal of the stress test makes switching lenders easier, there are still challenges in doing so. Including;
- Administrative Hassles: You need to give yourself time to make the move. Transferring your mortgage involves paperwork and coordination between your current and new lender, which can often take some time.
- Potential Fees: There is also a potential that some lenders may charge transfer fees, appraisal fees or penalties. (If you are renewing the transfer fee will be insignificant – in the hundreds of dollars).There will also likely be legal fees to discharge your old mortgage and register a new one.
- Credit Check: Even without the stress test, a new lender will still do a credit check. Which could impact your credit score.
Benefits of Staying with Your Current Lender
Remaining with your current lender can offer several advantages:
- Simplicity: Renewing with your existing lender is often more straightforward, with less paperwork and fewer administrative steps. Lenders are required to send a renewal 21 days before a mortgage expires. Then you simply pick your interest rate option, sign and voila – you’re done.
- Loyalty Discounts: Some lenders offer loyalty discounts or special rates for existing customers. This is why you let your lender know that you’re looking at other options. 2025 is the year of renewals and they are all scrambling to keep your business. That’s one reason mortgage rates have only recently started to fall even though the Bank of Canada cut interest rates in June 2024. Secure offers from other lenders so the bank knows you’re willing to move.
Benefits of Switching to a New Lender
Moving to another lender is easier than ever and is beneficial for many reasons! Including;
- Better Rates: A new lender may offer more competitive rates to try and attract your business.
- Improved Terms: You might even find better mortgage terms, such as lower fees or more flexible payment options
- Incentives Galore: Some lenders provide cash back and even cover transfer and lawyer’s fees.
Strategies to Secure a Lower Rate
So how do you ultimately secure that lower rate to make the decision to stay or go from your current lender?
- Shop Around and Negotiate With Lenders. Shop around and get options from a few new lenders. Compare rates and use online tools. Then don’t be afraid to negotiate with your current lender! If you’ve found a better rate tell them so and request that they match it.
- Improve Your Credit Score. A higher credit score can qualify you for better rates. Paying down debts (credit cards, credit lines) is the best immediate solution to credit score woes! It’s not unusual to see a jump of 100+ points if you pay these down. So plan ahead and if you need to, borrow from your family and friends as a short-term solution.
- Consider the Type of Mortgage. In the current market where interest rates are falling choosing a variable rate with a plan to convert to a fixed rate once mortgage rates have settled, may make sense.
- Work with a Mortgage Broker. If you find the process too overwhelming, find a reputable Mortgage Broker to work with. They will often be able to find the best possible rates out there for you.
Final Thoughts
The key to all of this is to start early. If you start planning early you will have the time to fix any credit score issues, shop around, and then negotiate the best possible rate. Your mortgage is one of the biggest financial commitments you will make. Ultimately, whether you stay with your current lender or go to a new one, you need to give yourself enough time to discover and then weigh your options.
If you have any questions please feel free to reach out. I’m here and always happy to help!