Your renewal letter, and why teachers should not sign it
A renewal letter quotes the lender's posted rate, which is rarely the best rate they would give a client who asked. Moving to a different lender when a term ends carries no prepayment penalty, so comparing is free. Signing and returning the letter the week it arrives is the single most expensive habit in Canadian mortgages.
Renewal is the easiest money most teachers leave on the table. The letter arrives, it is simple to sign, the payment looks familiar, and it goes back in the post. Lenders design it that way.
What the letter actually is
It is an offer, not a statement of what you are entitled to. The rate on it is typically the lender's posted rate. The rate the same lender would give a client who phoned and said they were shopping is often lower.
You are not obliged to accept it, and you are not obliged to stay. Federally regulated lenders must send the renewal statement at least 21 days before the term ends, and prepayment penalties apply only when you leave before the end of the term, so moving to another lender at maturity carries no penalty. That is the whole point of a term ending.
Why the teacher version is slightly different
Two things work in your favour at renewal. Your income is stable and easy to document, which is exactly what a competing lender wants. And if you have moved up the grid since you first bought, your qualifying position is stronger now than it was then, sometimes considerably.
The one thing to watch is timing. Renewal season lands in the middle of a school year for most people, and the letter tends to arrive when you have the least attention to spare. Put a reminder in for four to six months before your maturity date rather than reacting to the letter.
What to do instead of signing
- Start four to six months out. Rate holds commonly run 90 to 120 days, so you can secure something and still take the better option if rates fall.
- Get the market comparison before you speak to your current lender, so you know what you are comparing against.
- Ask your current lender what they will do knowing you are shopping. This alone often moves the number.
- Check the terms as well as the rate: prepayment privileges, penalty calculation and portability differ more than most people realise.
Switching is less work than it sounds
A straight switch to a new lender for the same balance is a relatively light process. You will requalify, including the stress test, and there is paperwork, but there is no land transfer tax and typically no appraisal drama on a straightforward file. If you want to increase the borrowing at the same time, that is a refinance rather than a switch, and it is a different conversation.
Sources and dates
Figures in this guide come from the sources below. Each entry shows the date the source states, or the date it was read when the source gives none. After the review date, treat any number as a starting point and check the source.
Common questions
Is there a penalty for switching lenders at renewal?+
No. At the end of a term you can move to a different lender without a prepayment penalty. That is what makes renewal the cheapest moment to shop.
How early should I start looking at my renewal?+
Four to six months before maturity. Rate holds commonly run 90 to 120 days, so starting early lets you lock something in while keeping the option to take a better rate if one appears.
Do I have to requalify to switch lenders?+
Yes, including the stress test. For most teachers that is straightforward, and if you have moved up the grid since you bought, your position is usually stronger than it was originally.
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