A lot can change in just a couple of years.
Maybe you've changed jobs. Maybe your family has grown. Maybe life has gotten a little more expensive. Maybe you've taken on some debt, or maybe you're in a much better financial position than you were before.
Whatever the case, your financial picture today might look very different than it did when you first got your mortgage.
That's why mortgage renewal can be a useful time to pause and talk about what's changed. The interest rate matters, but so do your plans, your budget and how long you expect to stay in your home.
Sometimes refinancing is worth exploring. Sometimes a straightforward renewal is the better choice. If your term isn't ending and your mortgage still fits, keeping the current arrangement may make sense.
What's the difference between mortgage renewal and refinancing?
Renewal means arranging another term when your existing mortgage term ends. A straightforward renewal continues the remaining balance without adding new borrowing. You may stay with your lender or explore a switch; a new lender must approve your application.
Refinancing replaces or restructures the mortgage arrangement, often to borrow more against your home equity or change the repayment period. It generally involves a fresh qualification review and may bring additional costs.
Switching lenders at renewal isn't automatically refinancing. The amount borrowed and changes to the mortgage matter. Read more in the FCAC guide to mortgage renewal.
Start with what's changed in your life
You don't need to arrive with a solution already picked out. Start with the questions that matter to you:
Has your income changed, or have you started working for yourself?
Are your regular expenses higher or lower?
Are you planning renovations, a move or retirement?
Would you like to pay the mortgage off sooner?
Are other debt payments putting pressure on your monthly budget?
A change is a reason to review your options. It isn't, on its own, a reason to refinance. For homeowners in Bentley, Lacombe, Rimbey and surrounding Central Alberta communities, the useful starting point is the same: what do you need your mortgage to do now?
Can refinancing help with debt consolidation?
It may. Debt consolidation combines debts into one borrowing arrangement. A homeowner who qualifies may be able to use available equity to repay higher-interest balances.
But those balances don't disappear. They become part of the new debt. A smaller monthly payment can help cash flow while still costing more overall if repayment stretches over many more years.
For a hypothetical example, consider a loan you could repay in three years. Moving it into a mortgage with a much longer repayment period could keep you paying for that expense long after those three years. Compare the repayment timeline, total interest and fees, even when the new rate is lower.
Previously unsecured debt may also become secured against your home. That puts the home at risk if you cannot repay. A workable budget and a plan to avoid rebuilding the paid-off balances belong in the conversation. See FCAC's debt consolidation guidance.
What costs should you compare?
Depending on your mortgage and lender, a refinance may involve:
A prepayment penalty if you break a closed mortgage before the term ends.
Appraisal, legal, title or registration costs.
Discharge or administration charges.
Lender or broker fees, where applicable.
Request a written cost breakdown. Include any fees added to the loan, because you'll pay interest on those too. Compare options over the same time period, including the balance still owing at the end.
Renewal may be a practical time to consider changes because the current term is ending. It doesn't make refinancing fee-free. FCAC explains the potential costs of breaking a mortgage contract.
Will you need to qualify again?
A refinance generally requires the lender to assess your current income, debts, credit and property. Applicable stress-test requirements and lender policies also matter. Having equity doesn't guarantee approval or mean all of it is available to borrow.
Equity is your home's value minus the borrowing secured against it. The lender may require an appraisal and applies limits to how much you can borrow. Learn more about borrowing against home equity and mortgage qualification.
When could a straightforward renewal be the better fit?
If you don't need additional borrowing and the mortgage still suits your plans, renewing may be enough. You can review the rate, term, payment options and flexibility without assuming you need a larger loan.
Keeping other debts separate and following a repayment plan may also cost less than refinancing. The right comparison includes today's affordability and tomorrow's debt balance.
Two common questions
Do I have to wait until renewal to ask?
No. Starting a few months before the term ends gives you time to understand the options and gather information without rushing.
Does a lower payment mean I'm saving money?
Not necessarily. Extending the repayment period can increase total interest. Ask to see the full comparison, including fees.
Let's talk about what makes sense now
My job isn't to tell you what you should have done differently. It's to help you figure out what makes sense now.
Explore mortgage renewal options or refinancing and home equity, or get in touch for a conversation. No pressure. No judgment.
Tara Nevers
Prairie Key Mortgages | Mortgage Architects
403-877-6995
www.prairiekeymortgages.com
tara@prairiekeymortgages.com
Written by Tara Nevers, Mortgage Broker with Prairie Key Mortgages, proudly helping families across Bentley, Lacombe, Ponoka, Rimbey, Sylvan Lake, Blackfalds, Red Deer, and Central Alberta.
General information. Mortgage options depend on lender approval, qualification, property valuation and applicable fees.
