A Step-by-Step Guide to Renewing Your Mortgage in Canada

When purchasing your home, you would have signed a mortgage with a set amortization period of 15 to 35 years. However, the mortgage itself is usually divided into terms ranging from 6 months to 10 years, most commonly 2 to 5 years.

If your mortgage is coming up for renewal soon, now is the perfect time to refresh your understanding of the mortgage terms you may have forgotten since signing, and perhaps even negotiate a mortgage that better aligns with your financial needs and goals.

Mortgage renewal isn’t a complicated process, but it’s wise to be prepared for what happens in the months leading up to it. In this blog, we’ll discuss what renewing your mortgage actually means, the timeframe involved, and provide an easy-to-follow step-by-step guide to renewing your mortgage in Canada.

What Does Renewing Your Mortgage Mean?

Renewing your mortgage means agreeing to a new term when your current mortgage term (usually 5 years in Canada) expires. This process is called a renewal. While your existing lender will provide an offer, you have the option to negotiate or switch to another lender if their offer is more favorable.

Renewal vs. Refinancing

Renewal adjusts your rate, term, and features while continuing your current principal and amortization. Refinancing, on the other hand, replaces your mortgage to access equity, consolidate debt, or change amortization significantly.

Most Canadians have 5-year terms, making renewals a key opportunity to adjust rates, prepayment options, or switch lenders with minimal hassle.

When Should Renewal Begin?

Usual schedule: Lenders generally send renewal notices 3 to 6 months before your term expires.
Start early: Shop rates before the notice arrives. Many lenders offer rate holds of 90–120 days to protect you if rates rise.
Avoid automatic renewals: Accepting the default offer can mean missing out on better rates or features.

Pro tip: Keep an eye on Bank of Canada announcements and posted rates to gauge market trends.

Step-by-Step Process for Renewing Your Mortgage in Canada

Step 1: Check Your Mortgage

Note your most recent statement and pull:

Balance and remaining amortization.
Ratetype (fixed or variable) and rate.
Frequency of payments.
Benefits of advance payment and any penalties.
Portability is useful if you could be moving during the next term.

Step 2: Examine Canadian Mortgage Rates Right Now

Look at several lenders and brokers.

Be careful of:

Actual contract rates you are eligible for, not merely headlines.
Rate holds and rate assurances.
Reductions on the shown rates.
APR versus simple rate: APR includes certain fees, providing a more accurate comparison.

Step 3: Decide Between Staying with Your Lender or Switching

If your lender offers a competitive interest rate and features you desire, such as prepayment, portability, and flexible penalties, stay.
If another lender provides a notably better interest rate and terms, account for discharge and switch charges; sometimes the better rate still wins after expenses.

Step 4: Negotiate Your Renewal Offer

Counter the first offer with:

Pre-approval or rate quotation you found elsewhere.
Specific requests for prepayment room, skipping payments, or shorter/longer terms.
Specify penalty computation approach (e.g., IRD versus 3-month interest for fixed terms).

Step 5: Get Pre-Approved With Additional Lenders (If Changing)

While you compare, a pre-approval establishes your maximum and preserves a rate. To speed things along, submit current records (earnings, work, and property tax bills).

Step 6: Sign the Renewal Agreement

Make sure the specifics are correct:

Rate, term, and payment amount.
Amortization remains on track unless you purposely alter it.
Prepayment benefits include 10–20% lump-sum options and payment increases.
The start date of the next term and any associated costs.

Tips for Renewing Your Mortgage in Canada

These recommendations for renewing your mortgage let you grab savings without compromising flexibility:

Pay down revolving balances, maintain minimal usage, and forgo new credit just before renewal to raise your credit rating.
Select purposefully fixed versus variable:

Fixed: It means payment stability and protection if rates rise.
Variable: Long-term, perhaps less expensive, but with payment or amortization changes.

Work with a mortgage broker: Especially helpful if you’re deciding between mortgage renewal and refinancing options, brokers compare many lenders, highlight fine print, and negotiate on your behalf.
Link term to your horizon: A move or significant life event expected? A shorter term might help one avoid consequences later on.
Make wise use of prepayment: Little, regular lump sums maintain cash flow flexibility while lowering interest over time.

Common Mistakes to Avoid in Mortgage Renewal

Accepting the first offer without negotiation: Lenders expect some discussion.
Not shopping around: Even a 0.10%–0.25% difference over five years can save thousands.
Ignoring penalties and prepayment options: A low rate with poor flexibility can be costly if you break the term early.
Choosing the wrong term: This can lead to fines or missed savings opportunities.
Overlooking key features: Consider portability, skip-a-payment options, and how penalties are calculated.

Wrap Up

Renewing your mortgage in Canada is a straightforward process when approached with preparation and knowledge. By reviewing your current mortgage, comparing rates, negotiating terms, and considering key features, you can secure a renewal that fits your financial goals while avoiding common pitfalls.

Ready to make your mortgage renewal simple and stress-free?

The experts at Diverse Mortgage Group provide comprehensive mortgage renewal solutions, guiding you through every step. We compare competitive rates from multiple lenders and help you secure the best terms for your situation.

People May Ask

1) Do I need to stick with my present lender?

Not at all. Switching lenders is optional. To determine potential savings, compare the new rate and terms against any switch or discharge fees.

2) May I alter my mortgage type at renewal?

Absolutely. In many instances, you may go from variable to fixed (or vice versa), alter term length, and update items such as prepayments without a complete refinance.

3) What if my mortgage renewal date passes?

If your renewal date passes, your lender may automatically re-term your mortgage at a default rate. It’s best to start reviewing options 3 to 6 months early, as the default rate is usually not the most cost-effective.

4) Is refinancing more damaging to my credit than renewal would be?

With your existing lender, a simple renewal typically requires minimal re-underwriting and has little, temporary impact on your credit. However, refinancing usually involves a full application and new credit checks, which can have a slightly greater effect.