Mortgage renewal in Canada: what to do before your term ends

Your renewal letter is a first offer

Your lender prices the renewal letter on the assumption that you'll sign it. About two-thirds of Canadian borrowers renew with their current lender, and many of them sign the rate in the letter without shopping around. The offer is priced with that in mind.

This is how pricing works when one side expects the other not to compare. Comparing now takes about two minutes instead of an afternoon of branch appointments.

The amounts can be large. On a $400,000 balance over a 5-year term, a quarter of a percentage point is worth roughly $5,000 in interest and principal position combined. Half a point is worth about double that. Gaps like these between a first renewal offer and a shopped rate are ordinary.

The 120-day window

Most lenders will hold a rate for you starting about 120 days before your maturity date. There are 3 reasons it's worth using.

First, a hold costs nothing. There's no fee, no commitment and no obligation to go with the lender holding it.

Second, it only moves in your favour. If rates fall between the hold and your maturity date, you get the lower rate. If they rise, you keep the one you held. Holding a rate never leaves you worse off than not holding one.

Third, it gives you something to negotiate with. Going to your current lender with a competitive rate held elsewhere changes the conversation. Often your lender matches it and you stay. That's a good outcome, and we'll tell you so.

Your options at renewal

When your term ends, you can renew, switch or refinance. Each comes with different rules.

Renew with your current lender. This is the lightest option. There's no new application, no re-qualification and no stress test. You sign what's in front of you, possibly after negotiating. The trade-off is that you're negotiating with the one lender that already has your business.

Switch to a new lender. A straight switch moves the same balance, over the same remaining amortization, to a different lender at a different rate. It's a full application (your income, credit and property are verified), but it isn't a refinance. Since November 2024, an uninsured straight switch isn't stress-tested.

Refinance. If you want to change the balance to take out equity, consolidate debt or pay for a renovation, that's a refinance. It's capped at 80% of your home's value, it's stress-tested as usual, and it involves a different set of numbers.

Most renewals come down to a choice between the first two. Refinancing makes sense for fewer people than it gets suggested to.

The November 2024 stress test change

Many borrowers haven't heard about this change, and it matters more than anything else in this guide.

Until late 2024, if you wanted to move your mortgage to a different lender at renewal, you had to pass the minimum qualifying rate test again. If you stayed with your current lender, you didn't. So people whose finances had tightened were stuck with their current lender, and the lender knew it.

Since November 2024, an uninsured straight switch isn't stress-tested again. Same borrower, same property, same balance, same remaining amortization, new lender: you qualify at the contract rate instead of the contract rate plus 2 percentage points.

This removes the advantage your current lender used to have. Whether you stay now comes down to who offers the better rate and terms.

There are 2 conditions. The balance can't increase, and the amortization can't be extended. Change either one and it becomes a refinance, which is stress-tested and capped at 80% loan-to-value.

What switching lenders involves

A straight switch is the lightest transaction in Canadian mortgage lending, and most people expect it to be much more work than it is.

| What you might expect | What usually happens | |---|---| | A full appraisal | Often waived on a straight switch, or paid by the new lender | | Legal fees | Commonly paid by the new lender to win your business | | A discharge fee from your current lender | Usually a few hundred dollars, and often covered as well | | Weeks of paperwork | A normal document package: income, ID and your current mortgage statement | | A new down payment | None. Your equity moves with you |

What you do need is time. Start at least 30 to 45 days before maturity, and ideally at the 120-day mark so you have time to compare. If a switch runs past your maturity date, your lender renews you automatically first, and undoing that costs a penalty.

Ask the new lender what costs it covers before you commit. It's a normal question, you should get an answer right away, and the answer goes into the commitment.

If your payment is going up

Many 2026 renewals are coming off terms signed when rates were much lower. Royal LePage found 38% of renewing borrowers expected a payment increase, and 35% said they felt more anxious about this renewal than their last one.

If that's you, work out the new payment first. The size of the increase decides what to do about it.

• A modest increase you can absorb. Shop the rate carefully and carry on.
• An increase that's uncomfortable but manageable. Consider a longer amortization when you switch. Going from 18 years back to 25 lowers the payment noticeably. It also adds years of interest, so make that choice with the number in front of you.
• An increase you can't carry. Talk to someone now, not in month three. You have options: a longer amortization, a different term, consolidating other debt, or in some cases an alternative lender for a year. Each works better the earlier you start.

On many renewals, the bigger issue is the unsecured debt sitting beside the mortgage, like a $40,000 line of credit. Renewal is a good time to deal with it.

Mortgage renewal checklist

Work through this in order. It takes about an evening.

1. Find your maturity date. It's on your annual statement and in your online banking.
2. Count back 120 days. That's the day you start.
3. Get the payout figure and current balance in writing from your lender.
4. Get a competing rate held. It takes two minutes, there's no credit check to start, and it costs nothing.
5. Take it to your lender if you'd like to stay. Ask them to match it. Sometimes they will.
6. Compare the terms as well as the rate. Look at prepayment privileges, how the penalty is calculated, and portability. A matched rate with a penalty based on the posted-rate interest-rate differential isn't a true match.
7. Decide with a week to spare, not on the maturity date.

If you do nothing, your lender will renew you automatically, often at or near the posted rate, and sometimes into a short open term at a much higher one. Doing nothing is usually the most expensive choice on this list.