5 Essential Things to Consider Before Renewing Your Mortgage

Renewing your mortgage might seem like a quick and simple process. Your lender sends you a form, you sign it, send it back—and just like that, it’s done.

With busy schedules, this can feel like the easiest and most efficient route. But that convenience might come at a cost.

Before locking in a new mortgage term, here are five important things you shouldn’t overlook:

1. Are You Ready for Payment Shock?

If you signed a 5-year fixed-rate mortgage in 2020, you’re likely facing significantly higher rates now.

Back then, fixed rates hovered around 2.50% early in the year and dropped to as low as 1.50% by year-end. Fast forward to today, and those same 5-year fixed rates are in the 3.84%–4.14% range, depending on your profile.

For example, if you borrowed $600,000 at 1.59% with a 25-year amortization, your monthly payment was $2,423.59. By 2025, your balance would be about $498,215.20.

Renewing at 3.84% with 20 years remaining would increase your payment to $2,969.35—a $545.76 jump each month.

Being financially and mentally prepared for this potential increase is critical.

2. What Matters More: Lower Rate or Lower Payment?

When asked, most people say “both,” but identifying your priority helps tailor the right solution for you.

• A lower rate reduces your interest costs over time.
• A lower payment helps improve monthly cash flow.

If cash flow is more important, you could consider refinancing and extending your amortization to 30 years. For example, refinancing the $498,215.20 at 4.04% over 30 years would reduce your payment to $2,380.40—even lower than your original payment at 1.59%.

Remember, a longer amortization doesn’t mean you’ll actually take 30 years to pay off your mortgage—it just gives you more flexibility, especially in the short term.

3. Do You Need to Access Equity?

Renewal is a great time to reassess your financial needs and goals. If you need access to funds, this might be the right moment to tap into your home equity.

• Planning home improvements?
• Carrying high-interest debt?
• Thinking about investments or education costs?

Rolling high-interest debt (like credit cards at 19.99%+) into your mortgage can lead to big interest savings and a more manageable monthly payment.

This doesn’t mean you’re stretching out debt forever—you can still structure payments to eliminate it faster, while paying significantly less interest.

4. What Are Your Short-Term Life Plans?

Far too often, people renew without aligning their mortgage with upcoming life changes. That can lead to financial missteps.

Ask yourself:

• Are you planning to buy an investment property?
• Considering moving or upsizing?
• Starting or growing a family?
• Going through relationship changes?

If you’re thinking of investing or relocating, refinancing now to lower your payments could boost your borrowing power for future plans. If you’re expecting lifestyle changes, like a growing family, easing your monthly obligations now could help with budgeting later.

Even your mortgage term and lender flexibility matter. A long-term fixed rate with steep penalties may not be ideal if your future plans aren’t 100% certain.

5. Can You Get a Better Deal Elsewhere?

Sticking with your current lender might feel convenient—but it isn’t always the best financial choice.

Lenders don’t always offer their most competitive rates at renewal. A bit of research or a conversation with a mortgage professional can reveal better deals available on the market.

Keep in mind, not every advertised rate is available to everyone. Your eligibility will depend on your credit, income, and overall financial situation.

Starting the renewal process early—ideally 90 to 120 days before your term ends—gives you time to explore options, lock in a rate, and protect yourself from potential increases. And if rates drop, there’s still time to adjust before finalizing your decision.

Even if you’ve already signed renewal papers, switching to a better lender could still be possible—if action is taken in time.

Final Thoughts

There’s much more to mortgage renewal than just rate. Prioritizing convenience or choosing based on interest rate alone could result in missed opportunities or higher long-term costs.

Take the time to consider your financial goals, lifestyle changes, and available options. The right mortgage should support your future—not just your present.

Need help reviewing your mortgage renewal options? A qualified mortgage advisor can help guide you through the process, ensuring the next step you take is the smartest one for your financial future.

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