Mortgage Renewal: That Letter Is Not Their Best Offer

Is the renewal letter the best they can do?

Generally no. What is printed there is usually posted pricing or close to it, and it assumes you will not shop.

This is not malice, it is arithmetic. Most people sign it and send it back. That letter is a starting point, not a conclusion. The only leverage you have is that you can leave.

So run it in the other order. See what is available elsewhere, then go back and talk, then decide what to sign.

How early should you start?

Most lenders will hold a rate for you up to 120 days before maturity, some 90. Those four months are the only stretch where you have leverage.

Holding a rate generally costs nothing and does not commit you. You can lock something outside while you negotiate with your current lender. If they match, you stay.

Start two weeks out and your options are usually whatever is in front of you. You will still get a mortgage. You just will not get a choice.

What is the difference between a renewal and a switch?

A renewal stays with your current lender. A switch moves the same mortgage to a new one. Renewing is mostly a signature and generally does not require requalifying.

A switch is a fresh application: income, credit, usually an appraisal, then a lawyer or title company registers the new charge. Most lenders cover the basic costs to win the business, but ask which costs are covered and which are not.

The price of switching is some paperwork and a few weeks. Whether it pays is a comparison, not a rule.

Since November 2024, is a switch still stress tested?

For a straight switch, generally not. As of November 21, 2024, the regulator dropped the minimum qualifying rate requirement for uninsured borrowers moving an existing mortgage to another federally regulated lender, provided the loan amount and the remaining amortization stay the same and no money comes out.

Two caveats. Insured mortgages, the ones carrying default insurance because the original down payment was under 20%, were already exempt. And what was removed is a regulatory requirement, not the lender's judgment. Most lenders still review income and debt ratios against their own standards.

Change the amount, stretch the amortization, or take cash out, and it is no longer a straight switch. Then the usual qualifying applies.

When is staying put the better move?

Several cases. Your income or credit is worse than when you last qualified, the property will not appraise where you need it to, or the balance is small enough that switching does not pay for the effort.

And the common one: your current lender matches once you show them something real. That happens often, and it is the entire reason to start months early. You need a comparison you can put on the table.

Staying is not losing. The point is the right terms, not a new logo on the statement.

Beyond the rate, what should you be reading?

Prepayment privileges, how the penalty is calculated, whether the mortgage is portable, and whether it is registered as a collateral charge. Those four decide how much freedom you have for the next several years.

The penalty math matters most. On a fixed term the calculation for breaking early varies widely between lenders, and if you sell or refinance mid-term it can cost more than the rate difference ever saved.

Watch for restricted products too. Some cheaper offerings limit prepayment, cannot be moved mid-term, or must be refinanced in-house. The discount is real and so is the cost, and the cost is written into the terms.

Who has the hardest time at renewal, and what should they do?

Three groups: people who went self-employed during the term, people whose credit took a hit, and people whose income dropped or who retired. Switching means requalifying, and you are assessed on today's file, not the one that was approved five years ago.

Start three to four months out and have someone read the file early, rather than discovering in the last two weeks that it will not move. If it genuinely will not move, renewing with your current lender generally does not require requalifying. Then staying is not a choice, it is the path, and every bit of energy goes into negotiating with them.

Newcomers coming off a first term are often in better shape than they expect. A longer domestic credit history and settled income usually mean more lenders will look.

What needs to be ready, and how long does it take?

Check three things first: your maturity date, your current balance, and the prepayment and penalty clauses in your contract. Those set how much time and how much room you have.

Documents are generally income confirmation, the property tax bill, your current mortgage statement, and home insurance. A routine same-amount switch usually completes in a few weeks. Which is why 120 days is comfortable and two weeks is not.

This is general information, not advice on your specific situation. Your maturity date and your penalty clause are in your own paperwork. Go look.

Common questions

Can the mortgage amount be increased at renewal?

It can, but that's technically a refinance, not a renewal, and the two are treated very differently. A straight renewal is largely paperwork — you keep the same balance and just pick new terms. Increasing the amount means a full new application: updated income documents, a new credit check, and yes, the stress test applies again, even though you're not switching lenders. Because it's a bigger process, it's worth starting well before your renewal date rather than assuming it can be folded into the same quick paperwork as a standard renewal.

Does switching lenders trigger a penalty?

Switching lenders on or after your maturity date generally doesn't trigger a penalty — your term is up, so there's nothing left to break. Moving mid-term is different: you're ending a contract early, and that usually comes with a penalty, calculated differently depending on whether your mortgage is fixed or variable. This is exactly why timing matters so much with renewals — the same move that's free at the right moment can cost real money a few months earlier. If you're unsure whether you're actually at maturity or still mid-term, check your mortgage statement or ask before assuming either way.

Who pays the legal and appraisal costs on a switch?

It depends on the lender. Most will cover basic transfer costs — legal work and a standard appraisal — because they're competing to win your file from your current bank. Where it gets less generous is discharge fees on a collateral charge, if your existing mortgage was registered that way; those are often left as yours to pay. The offer that looks cheapest on the surface isn't always the cheapest once these line items are counted. Ask for an itemized breakdown of exactly what's covered and what isn't before you sign, rather than assuming no cost to switch means truly no cost.

What happens if nothing gets signed and the term lapses?

Most lenders will roll you onto a short or variable term automatically, priced at their posted rate rather than anything negotiated. Nobody calls to warn you this happened — it just takes effect quietly on your maturity date if no paperwork was signed. Posted pricing is usually the least competitive option a lender offers, which makes doing nothing generally the most expensive choice on the table, not a neutral default. If your renewal date has already passed and you're not sure what you're currently paying, that's worth checking immediately rather than waiting for the next letter.

Can a co-borrower be removed at renewal?

That generally requires requalifying, because whoever remains on the mortgage has to prove they can carry the full payment alone, not just their share of it. This is a change to the file, not a straight renewal or switch, so expect it to involve income documents and a credit check the way a new application would. It matters most after a separation or when one partner's income has dropped, since the qualifying math can come out differently than either person expects. Start this conversation early — if the remaining borrower doesn't qualify alone, there are usually still options, but they take time to arrange.

Is taking a one-year term and waiting a reasonable move?

It can be a reasonable move, and most lenders offer a range of terms from one year up. Shorter terms are usually priced differently from longer ones — sometimes better, sometimes worse, depending on where the market thinks things are headed — so this isn't a free bet either way. The real question isn't the pricing gap, it's how sure you are about the next twelve months: a short term makes sense if you expect to sell, expect things to improve, or just don't want to commit long. It makes less sense if you already know you want stability and are choosing short-term purely on a guess about where rates go next.