Three to four months before your mortgage matures, you'll receive a renewal offer from your current lender. Many people sign immediately "for convenience." But renewal offers to existing customers are often not the best deals on the market. This article explains why you should compare, and how.
Common Pitfalls in Bank Renewal Offers
1. Not offering the best rate proactively
Banks know most customers sign renewals without shopping around, so the initial offer usually leaves room for negotiation. If you don't ask or compare, you may get the "standard rate" rather than the "best rate."
2. Terms may quietly change
Some terms may differ from your previous term, including:
- Prepayment privileges reduced from 20% to 15%
- Penalty calculation method changed
- Portability terms adjusted
These changes can affect your flexibility over the coming years. Read carefully before signing.
3. Automatic renewal defaults
If you don't respond in time, some lenders automatically renew on default terms, usually with a higher rate and less favourable conditions. Don't ignore renewal notices.
Three Things to Do Before Renewing
First: Review your current mortgage contract
Confirm your existing mortgage's:
- Current rate and remaining balance
- Prepayment penalty calculation
- Portability restrictions
- Renewal deadline
Second: Compare at least 3 lenders
Don't compare rate alone. Also compare:
- Prepayment privileges (usually 15%–20%)
- Penalty calculation (3 months' interest vs IRD)
- Portability and ability to increase the mortgage
- Hidden fees
Third: Assess whether refinancing is worth it
If another lender's offer is significantly better, consider transferring. But switching may involve:
- Prepayment penalty (potentially high)
- Legal or notary fees
- Property appraisal fee
- New lender application fees
Calculate total cost against savings before deciding.
When Refinancing Isn't Worth It
- The penalty exceeds the interest savings over the next few years
- Remaining term is very short (e.g. less than 1 year)
- The new mortgage has a lower rate but much less flexibility
- Your income or credit has changed and may not pass new approval
How to Negotiate with Your Bank
Even if you decide to stay with your current lender, try negotiating:
- Tell the bank you received better offers from other institutions
- Ask about rate discounts or matching policies
- Request improved prepayment privileges or other terms
- If negotiation fails, consider transferring
Frequently Asked Questions
Q: Do I need to resubmit income documents at renewal?
Renewing with your current lender usually does not require full documentation. Transferring to a new lender typically does.
Q: Can I increase my mortgage at renewal?
Yes, but increasing the amount is essentially a new application, requiring income and credit review, and may involve additional fees.
Q: Can I choose a different term at renewal?
Yes. You can choose 1, 2, 3, or 5-year terms based on your view on future rates and financial plans.
Compare before you renew
Free comparison of your current lender's renewal offer against other options.
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