Mortgage renewal in Canada: renew, switch or refinance

The 120-day window: why timing matters

Most homeowners first think about renewal when the letter lands. By then you may have three or four weeks left, which is tight if you want a different lender. A new lender needs time to underwrite your file, order a valuation if one is needed, and have a lawyer or title company move the mortgage over.

Start roughly 120 days before maturity. Many lenders will hold a rate for 90 to 120 days on a switch, so you can lock something in early and keep shopping. If rates fall before closing, a good broker asks the lender to honour the lower rate. If they rise, your hold protects you. Either way, you are not stuck signing whatever arrives in the mail.

Renewal payment shock: a 2021 mortgage, renewed today

A lot of Canadians locked in five-year fixed rates in 2021, when rates were near historic lows. Those terms are maturing now, and the jump can be real. Here is an illustrative example. The rates are assumptions chosen to show the arithmetic, not current market quotes.

That is roughly $5,600 a year more going to the mortgage, on the same house. Now suppose another lender offers 3.99% on the same term. The payment drops to about $2,531, which is $65 a month less than the 4.29% offer, or close to $3,900 across a five-year term. It won't erase the shock, but it is real money for a few phone calls and some paperwork.

Figures use semi-annual compounding, the way Canadian fixed-rate mortgages are calculated, and are rounded. Put in your own balance and rates with our renewal payment calculator to see your version of this table.

Switching mortgage lenders at maturity

A switch (sometimes called a transfer) moves your existing balance to a new lender when your term ends. Because you are not breaking the mortgage early, there is no prepayment penalty. That's the big difference from switching mid-term, where a fixed-rate penalty is the greater of three months' interest or the interest rate differential.

The rules on re-qualifying changed in late 2024. Federally regulated lenders no longer have to apply the stress test when you move an uninsured mortgage to them at renewal, provided it is a straight switch: same balance (or less) and no longer an amortization than you have left. Insured mortgages were already treated this way. Lenders still check your credit, income and property, and credit unions regulated provincially may follow their own policies, so it is worth confirming before you apply.

• Costs on a switch can include a discharge or assignment fee from your current lender, legal or title fees, and sometimes an appraisal. Many lenders cover some or all of these on a straight switch.
• Your current lender may improve its offer once it knows you have a competing quote. A written offer from another lender is the strongest negotiating tool you have.
• Look past the rate: prepayment privileges, portability and how the penalty is calculated all matter if you might sell or refinance within the term.

Ontario homeowners have a few province-specific details to plan around, from land registration to the timing of lawyers in busy GTA markets. See renewing a mortgage in Ontario for local examples.

Refinancing at renewal to consolidate debt

Renewal is the cheapest moment to change the size of your mortgage, because no penalty applies. If higher payments have pushed balances onto credit cards or a line of credit, rolling them into the mortgage can replace several payments with one at a lower rate. That makes it a refinance rather than a renewal: you can borrow up to 80% of the appraised value, you re-qualify at the stress-test rate (the greater of your contract rate plus 2% or 5.25%), and you'll normally need an appraisal.

Continuing the example above: say the home is worth $800,000 and the owners carry $35,000 on credit cards. Adding it brings the mortgage to about $454,200, roughly 57% of value. At the same illustrative 4.29% over 20 years, the payment is about $2,813, around $217 a month more than renewing the $419,200 balance alone. Minimum card payments on $35,000 at a typical 3% of balance would be about $1,050 a month.

The catch: stretching card debt over 20 years can cost more interest in total unless you put the monthly difference toward the mortgage. A good plan pays it down faster, using your prepayment privileges.

Read more about rolling high-interest debt into your mortgage or how a mortgage refinance works in Canada. If you want flexible access to equity rather than a lump sum, a home equity line of credit can be set up alongside the new term.

Documents you will need

Signing your current lender's renewal often needs nothing more than a signature. A switch or refinance is a new application, so expect to provide:

• Your renewal statement or most recent mortgage statement (balance, rate, maturity date, amortization)
• Government-issued photo ID for everyone on title
• Proof of income: recent pay stub and employment letter, or two years of T1 Generals and Notices of Assessment if self-employed
• Your most recent property tax bill, plus condo fee details if applicable
• Home insurance details
• For a refinance: statements for any debts being paid out

Typical renewal timeline

• 120 days out: review your statement, decide if you want a straight renewal or a refinance, start comparing.
• 90 to 60 days out: apply with a new lender if switching, lock the rate hold, send documents.
• 60 to 30 days out: approval, valuation if needed, lawyer or title company instructed.
• 21 days out (at the latest): your current lender's renewal statement arrives. Use it to negotiate, or let the switch proceed.
• Maturity date: the new lender pays out the old one and your new term begins.