Renewals
When your term ends, you can renew with your lender or switch to another. Renewal is one of the few moments you can change lenders without a penalty, so it pays to compare.
Key points
- Your term, often five years, ends long before your mortgage is paid off. Renewal is when you sign up for the next term.
- You don’t have to accept your lender’s renewal offer. You can negotiate, or switch.
- Switching lenders at renewal has no prepayment penalty.
- Start comparing about four months before your renewal date.
What is a mortgage renewal?
A Canadian mortgage has two timelines. The amortization is how long it takes to pay off the whole mortgage, often 25 or 30 years. The term is how long your current rate and conditions last, usually one to five years. When the term ends, you renew for a new term at the rates available then.
Most homeowners renew several times before their mortgage is paid off. Each renewal is a chance to get a better rate and to adjust the mortgage to fit your life.
| Term | Amortization | |
|---|---|---|
| What it is | How long your rate and conditions last | How long it takes to pay off the mortgage |
| Typical length | 1 to 5 years | 25 or 30 years |
| What happens at the end | You renew, switch or refinance | The mortgage is paid off |
Your three options
At renewal you can stay, switch or refinance. Here’s how they compare.
| Renew with your lender | Switch lenders | Refinance | |
|---|---|---|---|
| Prepayment penalty | None | None at maturity | None at maturity |
| Change the amount | No | No | Yes |
| Requalify | No | Often not, for a straight switch | Yes |
| Paperwork | Minimal | Moderate | Full application |
| Best when | The offer is competitive | Another lender offers better terms | You need equity or a new structure |
Renewing with your lender
Renewal offers aren’t always the lender’s best rate. Lenders know many people sign without looking, so the first offer can be higher than what they’d give a new client. A competing quote is often enough to bring it down.
Switching to a new lender
A straight switch moves the same balance and amortization to a new lender. There’s no penalty at maturity, and in many cases you don’t have to pass the stress test again. The new lender often covers the legal and transfer costs.
How NorthMerit can help
Tell us what you’re planning and we’ll connect you with one licensed mortgage professional who compares lenders for you. It’s free, and there’s no obligation.
When to start
Giving yourself time is what makes switching possible. Here’s a simple timeline.
| Time before renewal | What to do |
|---|---|
| About 120 days | Start comparing rates and think about your plans for the next few years |
| About 90 days | Many lenders can hold a rate for you from here |
| At least 21 days | Federally regulated lenders must send your renewal statement |
| Renewal date | Your new term starts, with your lender or a new one |
What a better rate is worth
Small differences in rate add up across a term. Here’s the effect of a rate that’s 0.25 percentage points lower on a $450,000 balance.
| Approximate saving | |
|---|---|
| First year | About $1,100 in interest |
| Over a five-year term | About $5,000 in interest |
The exact saving depends on your balance, rate and payment schedule.
If your payment is going up
If rates are higher than when you last signed, your payment may rise at renewal. There are ways to soften it: a different term length, a variable rate, extending your amortization if you qualify, or changing your payment schedule. A mortgage professional can show you the monthly effect of each before you decide.
Common questions
When should I start looking?
Is switching lenders complicated?
Your next home starts with one conversation.
Tell us your plans and talk to one licensed mortgage professional. Free, with no obligation.
