The Renewal Letter Trap
About four months before your mortgage term expires, you'll receive a renewal letter from your current lender. This letter typically includes a pre-filled offer that you can simply sign and return—convenient, but potentially costly.
Here's what lenders know that many borrowers don't: the majority of homeowners simply sign and return these renewal offers without shopping around. This tendency allows lenders to offer rates that are often 0.25-0.75% higher than what's truly available in the market.
For Alberta homeowners, that difference can mean thousands of dollars over a five-year term.
Why Alberta Homeowners Should Shop at Renewal
The Numbers
Consider this example:
- Mortgage balance at renewal: $400,000
- Lender's offered rate: 5.25%
- Best available rate: 4.75%
- Monthly savings: ~$110
- Five-year savings: ~$6,600
That's significant money that stays in your pocket rather than going to interest payments.
Alberta's Competitive Market
Calgary and Edmonton have active mortgage markets with numerous lenders competing for business:
- Major banks with Alberta branches
- Credit unions like Servus and ATB
- Monoline lenders (mortgage specialists)
- Online lenders with competitive rates
This competition benefits borrowers who shop around.
Renewal Timeline: When to Start
4-6 Months Before Renewal
- Note your renewal date and current rate
- Check your credit score and address any issues
- Gather income documents (pay stubs, NOAs)
- Start rate shopping
3-4 Months Before
- Get quotes from multiple lenders
- Lock in a rate hold if you find a good rate
- Compare offers including terms, not just rates
1-2 Months Before
- Make your final decision
- Initiate transfer process if switching lenders
- Allow time for paperwork and legal processing
At Renewal Date
- New mortgage takes effect (if switching)
- Or renew with current lender at negotiated rate
Staying with Your Current Lender
You don't necessarily need to switch lenders to get a better rate. Armed with competitive quotes, you can negotiate with your current lender:
Negotiation Strategy
- Get written quotes from competing lenders
- Contact your current lender's retention department
- Present the competing offers
- Ask them to match or beat the best rate
- Get any negotiated rate in writing
When Staying Makes Sense
- Current lender matches competing rates
- You value the existing relationship
- Mortgage features (like prepayment options) are superior
- You're unsure about qualifying with a new lender
Switching Lenders at Renewal
Moving your mortgage to a new lender at renewal has advantages:
Benefits of Switching
- Often the best rates are from new lenders wanting your business
- No penalty for switching at renewal time
- Fresh start with terms that suit your current situation
- Cash-back offers sometimes available for switching
The Switching Process
- Apply with the new lender as you would for a new mortgage
- New lender arranges to pay off existing mortgage
- Legal work handled by your lawyer or the lender's lawyer
- Typically $500-$1,000 in transfer costs (often reimbursed by new lender)
Alberta Switching Costs
Switching at renewal typically costs less in Alberta than other provinces:
- No land transfer tax: Unlike Ontario/BC, no tax on title changes
- Legal fees: $500-$1,000
- Appraisal: Often waived or lender-paid
- Discharge fee: $200-$300 from current lender
Many lenders offer cash back or absorb these costs to earn your business.
Renewal Qualification Requirements
If Staying with Current Lender
Straightforward renewals with your existing lender typically require:
- No new qualification required if same terms
- May need to requalify if increasing mortgage amount
- Credit check (soft pull usually)
If Switching Lenders
New lenders will fully qualify you:
- Income verification and stress test
- Credit check (hard inquiry)
- Property appraisal (may be waived)
- Standard mortgage application process
Qualification Concerns
Some Alberta homeowners worry about qualifying at renewal if their situation has changed:
- Job change: Usually not a problem if you have stable employment
- Income reduction: May limit options but can still renew with current lender
- Credit issues: Current lender may be more flexible than new lenders
Fixed vs. Variable at Renewal
Renewal is a decision point for your rate type:
Choosing Fixed Rate
- Payment certainty for the term
- Protection if rates rise
- Higher starting rate than variable
- Potentially larger penalties if you break early
Choosing Variable Rate
- Lower starting rate typically
- Potential savings if rates decline
- Lower penalties (usually 3 months' interest)
- Payment fluctuation risk (unless fixed payment variable)
Current Rate Environment
Consider the Bank of Canada's trajectory when making this decision. If rates are expected to decline, variable becomes more attractive. If rates are low and expected to rise, locking in fixed may be wise.
Renewal Mistakes to Avoid
1. Signing Without Shopping
The most costly mistake is simply signing the renewal letter without comparing rates. Even 15 minutes of rate shopping can save thousands.
2. Waiting Too Long
Starting rate shopping in the final weeks limits your options and negotiating power.
3. Focusing Only on Rate
Consider the complete mortgage picture: prepayment options, penalty calculations, portability, and other features.
4. Ignoring Refinancing Opportunities
Renewal is also a chance to refinance for debt consolidation, home improvements, or equity access. Consider whether straight renewal is best.
Your Alberta Renewal Action Plan
Mark your calendar 4-6 months before renewal and commit to shopping around. Get quotes from at least three lenders, including your current one, and compare not just rates but overall value.
Whether you stay with your current lender at a negotiated rate or switch to a competitor, the effort of shopping can save you thousands of dollars over your next mortgage term.
Ready to Get Started?
Contact us today for personalized mortgage advice and competitive rates.
