How does the Early Mortgage Renewal work?

If you still have an outstanding balance on your mortgage at the end of your mortgage term, you will have to renew for another term. By law, your lender has to send you a renewal notice 21 days before your term is up, but most allow you to renew with them anytime in the final 120 days of your current mortgage term, without having to pay a penalty to break your term early; this is known as an early mortgage renewal.

During the final 120 days of your term, most lenders will contact you with an early renewal offer. The offer will include a new mortgage rate (usually just slightly less than their posted rate) and term (typically the same length of the term you are currently in), as well as a letter you can sign to accept the offer and mail back. By signing the letter, you are accepting the early renewal offer and, therefore, your mortgage will be renewed with your current lender for another term.

If it seems all too convenient to sign your early renewal offer and send it back, that’s because it is – and that convenience comes at a price. By accepting your early renewal offer, you are going to end up paying a higher interest rate than what you could have gotten if you had shopped around and switched to another lender.