Should You Renew Your Mortgage With The Same Lender?

Obtaining a mortgage can be a tedious process, especially with the tighter approval criteria presented by the Canadian lending authorities. But, once your mortgage is approved, you can relax for a bit until it’s time to renew your mortgage.

If you’re nearing the renewal of your mortgage and are considering renewing your contract with the same lender to reduce your hassles, you’re not alone. According to the Residential Mortgage Industry Report released in the summer of 2018, by the Canadian Mortgage and Housing Corporation (CMHC), the number of mortgage renewals with the same lender increased by 16% over the previous year.

Does that mean as mortgage renewals with the same lender increase, you should sign on the dotted line without considering other lenders?
Not necessarily! When you reach your mortgage renewal stage, you have two choices. Either you can renew your mortgage with the same lender, or you can shop around for the best terms at the time of renewal. If you decide to go with a new lender, you must go through the same process of applying for a new mortgage.

The CMHC report suggests that the strict mortgage approval criteria is one factor that has contributed to an increase in loan renewals with the same institution. As people are worried that they may not qualify for a mortgage with other lenders, they prefer staying with the lender they have.

In 2017, the Office of Superintendent of Financial Institutions (OSFI), the agency that regulates the Canadian financial industry, announced tighter mortgage approval rules. The biggest change they introduced was related to uninsured mortgages or homebuyers with 20% or more for a down payment. These borrowers must undergo a “stress test” or qualify using a minimum qualifying rate, which has led many borrowers to favor the same lender.

Moreover, most lenders have started sending renewal letters to their clients three to six months before the renewal term is over, making it convenient for people to get their renewals over with. Sadly, what most people fail to realize is that these lenders have revised their terms and hiked their rates. Those who are aware that the rates have increased, avoid moving to a new lender because they want to avoid going through the rigorous approval process again, which entails the preparation of new documents, lawyer’s fees, and appraisals.

But, in some cases, despite the trouble, switching to a new lender can actually save thousands of dollars, especially when the rates are lower and the mortgage amount is higher. As a result, before renewing your mortgage terms with the same lender, try reviewing other mortgage options. Talk to your mortgage broker and ask them for their advice. They can scope the mortgage market and find you alternative options and help you decide which way to go to keep you financially stable and happy.

Bottom Line
If you cannot afford to shift to a new lender, it’s best to stay with the same one, but try to negotiate with them to revise their terms if you find them challenging to comply with. If you are ready to go through the mortgage approval process all over again, feel free to try a new lender. Irrespective of which option you choose to go with, make sure you consult your mortgage broker for expert advice and so that they can professionally negotiate on your behalf with the lender you choose.

If you’re looking for an experienced mortgage broker in Toronto, ON, reach out to Mortgages By Erin. Erin has over ten years of experience in the mortgage industry and has successfully helped hundreds of people obtain the ideal mortgages for their needs. She assesses your needs, your documents, and your financial position before putting together financial solutions to help you achieve your homeownership goals.

To learn more about Mortgages By Erin, contact us here or visit our website to learn more.