As I hit the five-year mark of being a homeowner, it's time to celebrate and prepare for the next chapter. These years have brought many exciting milestones: our mortgage is now under $400k, we’ve enhanced our home with a new back deck, a dryer, and lots of painting. But with these achievements also comes the impending task of mortgage renewal — a process made all the more daunting by the volatile interest rates over the past year.

Step 1: Get Up to Date on the Market

Over the past year, Canadians have faced significant volatility in mortgage rates. The Bank of Canada (BoC) increased its policy interest rate to 5.0% by mid-2023, the highest in two decades, to combat inflation that peaked at 8.1% in 2022. Recently, inflation has begun to ease, and in June 2024, the BoC made its first rate cut in two years, reducing the rate by 0.25% to 4.75%. This has led to predictions that rates may continue to decrease through the latter half of 2024, although not without some short-term fluctuations​.

A considerable chunk of Canadians, including Albertans, are up for mortgage renewal in 2024. Recent data shows that approximately 23% of all Canadian mortgages will be renewed this year, translating to about $251 billion worth of mortgages. This number is expected to rise to 50% within two years​​. That’s a LOT of people, so I suppose we can all feel slightly less lonely during this somewhat overwhelming jump in rates.

Step 2: Check Your Renewal Offers

Most lenders will send you a standard renewal offer a few months before your mortgage term ends. This initial offer can serve as a starting point for your comparison shopping. Over the past month, my current mortgage provider has sent numerous updates about our renewal rate. 

Initially, I decided to wait before accepting their first offer, aware that the Bank of Canada had a rate announcement on the horizon. This decision paid off as our offer eventually decreased. This experience underscored the importance of timing and being informed; had we not waited, we might have locked in a higher rate.

Step 3: Review Your Budget and Run the Numbers

To determine your pay, do three calculations: worst-case, realistic, and best-case scenarios. This way, you’ll be prepared for any outcome. Despite waiting, it’s inevitable that our monthly payments will increase. Our current rate is 2.89%, while the average rate now hovers just under 5%, with only a few offers dipping below 4.84%. This means our monthly mortgage payments will likely increase by $300-400. Thankfully, we purchased a home we could afford on one income, a wise decision given the unpredictability of financial markets.

Step 4: Prepare to Compare

Preparing for mortgage renewal can seem daunting, but with a bit of organization, it can actually be quite manageable! Here’s how I’m gearing up:

• Comparing Offers: It’s shopping time! Different lenders offer varying rates and terms, so it’s essential to compare.
• Evaluating Fixed vs. Variable Rates: A fixed-rate mortgage offers stability, while a variable rate might start lower but can fluctuate. This decision is based on what feels right for our financial situation.
• Seeking Professional Advice: Meeting with a mortgage advisor or financial planner provides expert insights. They can help us navigate the options and find the best fit for our needs.

Step 5: Get Financially Ready

To make the process as smooth as possible, it's important to have all the necessary documents ready. Here’s a handy checklist of what you’ll need:

• Current Mortgage Renewal Offer: Your starting point for comparison.
• Home Insurance Documents: Proof of insurance for your property.
• Income Verification: Recent pay stubs, T1s for the past two years, and notice of assessments.
• Financial Statements: Bank statements and your CRA statement of account.
• Property Details: Recent property tax assessments and any relevant property appraisal reports.
• Credit Report: Ensure your credit report is up-to-date and accurate, which can influence your mortgage rate.

Step 6: Make a Decision

After gathering all the information and meeting with mortgage advisors, I reviewed the offers and considered the current promotions.

Navigating a mortgage renewal can be a complex process, but it can be managed effectively with careful preparation, comparing offers, and seeking professional advice. Staying informed about market trends and understanding your financial situation is critical. And, sometimes, waiting and exploring your options can lead to better outcomes.

We can navigate this renewal period by taking these steps and continue enjoying our home for many more years. Remember, a mortgage renewal is just another chapter in your homeowner's journey — one you can approach confidently and maybe even with a little excitement!