Every mortgage term eventually comes to an end, and when it does, your lender will send you a renewal letter with a proposed new rate and term. For a lot of homeowners, that letter feels like the final word: sign it, and move on with life. In reality, it's just an opening offer, and treating it as the only option available to you is one of the most common and most expensive mistakes Canadian homeowners make.
What actually happens at renewal
When your mortgage term matures, usually after a period of one to five years depending on what you originally chose, your existing agreement ends and you need a new one, either with your current lender or a different one. A straightforward renewal with your existing lender, where the loan amount and property don’t change, is generally not subject to the same full stress test that applies to a new purchase or a lender switch.
Why the first offer isn't necessarily the best one
Lenders count on inertia. Many homeowners simply sign whatever renewal rate shows up in the mail or their online banking portal because it feels easier than shopping around. The rate offered to an existing customer at renewal is not automatically the lowest rate that lender is willing to give, and it’s often noticeably higher than the rate a new customer might get walking in the door, or the rate you could get by asking your existing lender to match a competing offer.
How far ahead to start shopping
A good rule of thumb is to start actively comparing options three to four months before your maturity date. Most lenders allow you to lock in a renewal rate in advance, and many will also honour a rate drop if rates fall further before your actual renewal date, so locking in early rarely costs you the ability to benefit from a better rate later.
Switching lenders versus renewing in place
Switching your mortgage to a new lender at renewal is a legitimate, and sometimes very worthwhile, option, but it’s not without cost or friction. A lender switch is typically treated as a new mortgage application, which usually means it is subject to the stress test, updated income and credit verification, and a new set of lender conditions.
Costs that can come with switching
Switching lenders can involve discharge fees from your current lender, legal fees to register the new mortgage, and sometimes an appraisal fee. Some lenders offer to cover certain switch-related costs as an incentive to win your business, but it’s important to compare the full picture rather than just the advertised rate.
How to actually compare renewal offers
Rate is the number everyone focuses on first, but it’s only one piece of what makes a mortgage offer good or bad for your situation. Prepayment privileges, portability, and the penalty structure itself are all worth understanding up front rather than discovering them only when you actually need them.
- Compare the actual rate, not just the discount being advertised off a posted rate.
- Check prepayment privileges: how much extra principal can you pay down annually without penalty.
- Confirm portability if there's any chance you'll move before the new term ends.
- Understand the penalty calculation method before you need it, not after.
- Ask whether the new lender or your existing lender will cover any switching costs.
What changes if your situation has changed
A renewal is also a natural moment to reassess your broader mortgage strategy, not just the rate. If your income has grown, you may want to explore shortening your amortization to pay off the mortgage faster, or increasing your payment frequency to save on interest over time.
Blend-and-extend as an alternative to waiting
If rates have dropped since you arranged your current mortgage but your term isn’t up yet, some lenders will offer a blend-and-extend option instead of making you wait until maturity or pay a full penalty to break your term. This typically combines your existing rate with the lender’s current rate, weighted by how much time is left on your term versus the new term being added.
Making the most of your renewal window
The single most effective thing you can do at renewal is simply not treat the letter from your existing lender as your only option. Getting a comparison from me costs you nothing and takes a fraction of the time it took to originally buy your home, and it puts you in a position to either confirm your current lender’s offer is genuinely competitive or find something better.