Mortgage Renewal Wave Hits Canada: Experts Warn of Hidden Traps and Costs

For Canadians whose mortgages are up for renewal this year, a letter will arrive from their lender with a new rate and a signature line. Many people sign it without much thought, locking in one of their biggest expenses for years.

But experts warn that this process can be costly if not approached carefully. According to Christopher Liew, a CFP and former financial advisor who writes personal finance tips for thousands of Canadian readers at Blueprint Financial, the key is understanding how the renewal process works in Canada and being aware of the deadlines and traps to avoid.

Liew notes that Canada is experiencing a 'historic mortgage renewal wave', with over 1.5 million households having already renewed their mortgages at higher interest rates, and another million set to sign new terms this year. The Bank of Canada's recent decision to hold its policy rate at 2.25 percent means that borrowers will not be able to rely on lower rates to save them money.

Liew advises borrowers to start the renewal process by finding their exact maturity date and counting back 120 days, which is when most lenders allow borrowers to lock in a renewal rate or start an application with a competitor. He also warns that treating the renewal letter as an opening offer rather than a bill can be costly, and encourages borrowers to negotiate and compare offers.

Liew recommends having paperwork ready in case borrowers decide to switch lenders, including recent pay stubs, proof of income, mortgage statements, property tax bills, and government ID. He also notes that the Office of the Superintendent of Financial Institutions (OSFI) no longer requires a stress test requalification on straight switches, making it easier for borrowers to move lenders.

In terms of choosing a term, Liew advises borrowers not to default to a five-year fixed rate, but rather consider their individual circumstances and needs. He notes that there is no universally correct answer, and that the trade-offs between different term lengths should be carefully considered.