A mortgage renewal is the process of renegotiating or extending your mortgage when your current term expires. Unless you pay the remaining balance in full at the end of your term, you will need to renew, and this is also the point at which you can switch lenders, change your rate type, or adjust other terms without paying a prepayment penalty.
When you take out a mortgage, your contract is in effect for a specific period known as the mortgage term, which can range from a few months to five years or longer. You have to renew your mortgage at the end of each term unless you pay the balance in full. Most homeowners will go through several renewals over the life of their mortgage before the full amortization is complete.
If your mortgage is with a federally regulated financial institution, such as a bank, the lender must provide you with a renewal statement at least 21 days before the end of the existing term. That statement must include the remaining principal, the interest rate offered to you, the payment frequency, the term of the new agreement, and any applicable charges or fees. It must also note whether your mortgage will renew automatically if you take no action. Signing back the renewal offer from your current lender is the simplest path, but it is rarely the most cost-effective one. You may qualify for a discounted interest rate that is lower than the rate quoted in your renewal letter.
You do not have to renew your mortgage with the same lender. You can move your mortgage to another lender if their conditions better suit your needs. This is sometimes called a 'straight switch.' A significant regulatory change took effect on November 21, 2024: uninsured mortgage borrowers switching to a new lender at the end of their term are now exempt from the Minimum Qualifying Rate stress test, provided their mortgage size and amortization period remain unchanged. Insured borrowers have been exempt from this requirement since January 2024. This means nearly all homeowners can now shop freely for better rates at renewal without the barrier of requalifying at a higher stress test rate.
Renewal is also an opportunity to switch between a fixed and variable rate, change your payment frequency, or shorten your remaining amortization to pay less interest over time. Most Canadian homeowners should start reviewing their renewal options 120 to 180 days before maturity, which gives enough time to compare lenders, consult a mortgage broker, and negotiate.
Related reading: What Is the Mortgage Stress Test in Canada?, What Is Mortgage Portability and How Does It Work in Ontario?, and What Is a Mortgage Prepayment Penalty and How Is It Calculated in Canada?.