The Bank's Renewal Offer: How to Decode and Negotiate

Every year, hundreds of thousands of Canadians receive a letter from their bank informing them of their upcoming mortgage term maturity, accompanied by a renewal offer. This seemingly simple letter contains financial decisions with significant consequences. Accepting without analyzing can cost you thousands of dollars over the duration of your next term. Here is how to decode each element of this offer and maximize your negotiating power.

Anatomy of a Renewal Offer

• The proposed interest rate: this is the bank's posted rate, not the best available rate. It serves as a starting point for negotiation, not a conclusion.
• The proposed term: usually 5 years fixed, but other options (1, 2, 3, 4 years, or variable) may better suit your situation and market expectations.
• The remaining mortgage balance: verify that this amount matches your statements and that no unexpected fees have been added.
• The new payment amount: calculated based on the new rate, remaining balance, and residual amortization. Compare it to your current payment to measure the impact.
• General conditions: prepayment privileges, portability, mortgage charge type, and penalty clauses.
• The response deadline: a date set by the bank, but not an absolute legal obligation. Your term renews automatically at maturity if you do not respond.

The Most Common Renewal Mistakes

1. Accepting the first rate without negotiating: This is the most costly mistake. Banks offer their posted rate, knowing that informed clients will negotiate. On a $350,000 loan over 5 years, a 0.50% reduction represents approximately $5,000 in interest savings. Always obtain comparative offers before signing.
2. Considering only the interest rate: The rate is important, but loan conditions matter just as much. A slightly higher rate with 20% annual prepayment privileges may be more advantageous than a lower rate with 10% privileges. Loan portability and charge type (conventional versus collateral) also affect your future flexibility.
3. Ignoring the possibility of switching lenders: Many borrowers mistakenly believe that changing lenders is complicated or expensive. At term maturity, the transfer happens without penalty, and the new lender often absorbs all costs. An AMF mortgage broker can manage the entire process for you.
4. Waiting until the last minute: Receiving the renewal offer 21 days before maturity and trying to shop within that short window is stressful and ineffective. By starting at 120 days, you have time to compare, negotiate, and if needed, complete a lender transfer without urgency.

Effective Negotiation Strategies

The most effective negotiation relies on concrete data. Before contacting your bank, obtain at least two or three written offers from competing lenders through an AMF-certified mortgage broker. Present these offers to your bank advisor, specifically asking whether the bank can match or beat these conditions. Bank advisors have some flexibility to reduce the rate (often called the "retention rate"), but they will generally not offer it spontaneously. If the bank cannot be competitive, you already have your alternatives in hand.

Conventional Charge Versus Collateral Charge: A Crucial Detail

An often-overlooked aspect of the renewal offer is the mortgage charge type. A conventional charge is registered at the Quebec Land Registry for the exact loan amount and can be easily transferred to a new lender through a simple assignment. A collateral charge, used by default by several major banks (notably TD and National Bank), is registered for an amount higher than the loan (often 125% of the property value). While it offers more flexibility to borrow additional funds without notary fees, it makes transferring to another lender more expensive because it requires a discharge and new mortgage registration. This factor must be considered in your renewal offer analysis.