Over the last couple of weeks I’ve had several renewal calls that started the same way. A homeowner gets the renewal letter from their lender, sees a rate and a signature line, and assumes the choice is already made. Either they sign it, or they face a new appraisal, a stress test and a legal bill to go anywhere else.

Neither is true. The renewal letter is an opening offer. It’s worth knowing what it is, why it shows up when it does, and what your other options really involve.

Why the letter arrives when it does

If your mortgage is with a federally regulated lender, such as a bank, they have to send you a renewal statement at least 21 days before your term ends. Many send it earlier, but 21 days is the legal minimum, and that’s not much time to compare offers, get documents together and move to a new lender.

The letter is built to be signed and sent back. The rate in it is often not the best rate that lender will give you. It’s the rate they expect most people to accept. And if you do nothing, you may be renewed automatically or moved into a short-term or open mortgage at a higher rate until you decide.

Start 120 to 180 days out

The real decision window opens four to six months before your maturity date, well before the letter arrives. That’s when to:

• Get a rate hold on a switch. Many lenders will hold a rate for up to 120 days. If rates rise, you’re protected. If they fall, you can usually take the lower rate.
• Ask your current lender for their best offer. Not the letter rate. Ask directly, and ask what they can do if you have a competing offer.
• Check your plans for the next few years. A possible move, a big lump-sum payment, a renovation or a change in your income all affect which term and which type of mortgage make sense. The best rate on the wrong mortgage can cost more than a slightly higher rate on the right one.

What switching really takes

This is where most people overestimate the work.

A straight switch means moving the same balance to a new lender, on the same amortization schedule, with no extra money added. Since November 21, 2024, a straight switch at renewal no longer has to be re-qualified at the stress-test rate, whether your mortgage is insured or uninsured. That change matters most for people whose income hasn’t kept up with rates, or who would have had trouble qualifying at today’s stress-test rate.

You’ll still need to apply. Expect to provide current income documents, a recent mortgage statement and identification. In many cases the new lender covers the standard legal and appraisal costs of a straight switch. Your current lender will usually charge a discharge fee, typically a few hundred dollars, to release the mortgage. Switching at maturity means there’s no prepayment penalty.

When it’s no longer a straight switch

The stress-test exemption only applies if nothing else changes. You’ll need to fully re-qualify if you:

• add money to the mortgage (to consolidate debt or fund a renovation, for example)
• extend the amortization beyond what’s left on your current schedule
• change who’s on title, for example after a separation

None of these are reasons not to do it. They just mean the application is a full one, and it’s better to know that four months before maturity than two weeks before.

Sometimes staying is the right call

Shopping your renewal doesn’t mean you have to leave. Just this month, a client of mine asked their current lender to do better than the renewal letter. Once asked, the lender improved its offer, and the client stayed. No paperwork, no switching costs, and a better rate than the one in the mail.

Staying can also be the only realistic option. If your credit or income has changed since you last qualified, your current lender may be the only one that will renew you without a full review. That’s worth knowing early too, so you can plan around it rather than find out at the last minute.

Your renewal checklist

Before your renewal conversation, have these ready:

1. Your maturity date
2. Your current balance and rate
3. How much of your prepayment privileges you’ve used this year
4. Whether your mortgage is insured
5. Your plans for the next five years: moving, renovating, paying down faster, or changes in income

If your renewal is coming up in the next six months, now is the time to look at it. I’m happy to review your renewal offer alongside what’s available elsewhere, and tell you plainly whether it’s worth switching.

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