Mortgage Renewal Checklist: Don't Just Sign the Letter

Four to six months before your term ends, your lender will mail you a renewal offer. It takes thirty seconds to sign and send back. That is exactly what they are counting on — renewal inertia is worth a great deal of money to lenders, because the rate on that letter is rarely the best rate they would approve if they knew you had somewhere else to go.

Start early

You can switch lenders at renewal with no penalty, and most lenders let you finalize the new mortgage up to 120 days before maturity while holding a rate. Starting the review four to six months out gives you time to shop, get an appraisal if needed, and complete a lender switch without a gap in payments.

The checklist

1. Get your current lender's best held rate — not the posted one. Call and ask what they will actually do to keep you. The mailed offer and the retention rate are often 0.30–0.60% apart.

2. Shop the market in parallel. A broker can put your file in front of a dozen lenders at once. Bring the best competing offer back to your current lender, or take it.

3. Weigh term length against your plans. A five-year fixed is not automatically right. If you might sell or refinance in two or three years, a shorter term or a variable rate caps your penalty exposure.

4. Check the prepayment terms. Renewal is the moment to move to a lender with 20% annual lump-sum privileges and double-up payments if you want to pay the mortgage down faster.

5. Consider whether to add to the mortgage. If you have high-interest debt or a renovation planned, a renewal is a low-friction time to refinance and roll it in — provided you have the equity and it clears the stress test.

6. Confirm the switch costs. A straight switch (same balance, same amortization) is often paid for by the new lender. Adding money or extending the amortization turns it into a refinance, which carries legal and possibly appraisal costs.

What a switch involves

If you move lenders, the new lender handles the payout of the old one and registers a new mortgage. You re-verify income and the property value, but you are not re-buying the home. It is far less work than a purchase, and it usually completes in two to three weeks.

The single most expensive renewal habit is signing the first letter. Even if you end up staying, a competing quote in hand changes the rate your current lender offers.