Mortgage Renewal

What actually renews, and what does not

When your mortgage term matures, the loan does not end; the contract does. Your outstanding balance and your remaining amortization period carry over unchanged. What resets is everything else: the rate, the term length, and the conditions, all repriced at whatever the market offers that month. A borrower on a 25-year amortization with 5-year terms will live through this reset four or five times.

A renewal is not the same as mortgage refinancing. A straight renewal keeps the same balance and amortization and happens at maturity, penalty-free. A refinance changes the loan itself, borrowing more or restructuring, and can happen anytime, penalties included. The distinction matters legally and, since 2024, for the stress test too.

Rule one: never sign the first letter

A few months before maturity, your lender mails a renewal offer with rates filled in and a signature line. It is designed to be signed, and a striking share of borrowers sign it as-is. Do not. The first letter typically quotes rates at or near posted, well above what the same lender grants customers who push back, because lenders count on inertia at renewal the way gyms count on unused memberships.

The calendar is your leverage. Most lenders will hold a renewal rate 120 days before maturity, so start shopping about four months out: get quotes from two or three competitors or a broker, then bring them to your lender. Federally regulated lenders must send your renewal statement at least 21 days before maturity, but treat that letter as a last call, not a starting gun. If rates drop between your rate hold and your maturity date, most lenders will give you the lower rate.

Switching lenders at renewal

Renewal is the one moment you can leave your lender without a penalty, and since late 2024 the biggest friction is gone. As of November 21, 2024, a straight switch of an uninsured mortgage at renewal, same balance, same amortization, no new money, no longer requires requalifying under the stress test; insured switches were already exempt. Before that change, many borrowers who could not pass the test at inflated qualifying rates were effectively captive to their existing lender, which knew it. Now the market is genuinely open at every maturity date.

Switching is not free, but it is cheap and often free in practice. Expect an appraisal (roughly $300 to $500), a discharge fee from the old lender ($200 to $400 in most provinces), and legal or transfer fees (as of July 2026), and note that collateral-charge mortgages cost more to move. New lenders hungry for your balance frequently cover some or all of these. If the rate gap is a quarter point or more on a typical balance, switching usually pays for itself within months.

Renewal shock: when the new rate is much higher

Because the rate resets to market, renewing out of a low-rate term into a higher-rate world produces an abrupt, permanent payment jump, even for borrowers who never missed a payment. Take a $400,000 mortgage signed at 1.9% on a 25-year amortization: the payment is about $1,675 a month, and after five years the balance is roughly $334,400. Renewing that balance over the remaining 20 years at 4.5% (as of July 2026, for illustration) pushes the payment to about $2,108. That is $433 more per month, a 26% jump, with nothing changed except the date.

If the new payment does not fit, there are ways to soften it. Re-extending the amortization back to 25 years at renewal cuts the payment in the example to about $1,851, at the cost of more years of interest. A lump sum just before or at maturity shrinks the balance the new rate applies to; at maturity it is penalty-free and unlimited, and mid-term your prepayment privilege covers it. Many lenders also offer early renewal or blend-and-extend options that mix your old rate with the new one ahead of maturity; occasionally useful, but run the math, because the blend usually prices in the lender's favour.

Renewal is also a chance to redesign the mortgage

Because everything except the balance and the amortization is up for negotiation, maturity is the cheapest possible moment to change your setup. You can pick a different term length, a shorter one if you expect rate cuts, a longer one if you want certainty. You can move between fixed and variable, change your payment frequency, or switch to accelerated payments, all without penalty. Renewing into a 5-year fixed by reflex is a smaller mistake than signing the first letter, but it is the same mistake: the term you choose is a bet on where rates are headed, and renewal is when you place it.

The auto-renewal trap

Ignore the letters entirely and most lenders will not call the loan; they will automatically renew you, typically into a 6-month term at posted rates or into an open mortgage at a much higher rate. It protects you from technical default, and that is all it does: auto-renewal rates are among the worst prices in the mortgage market. Put your maturity date in your calendar with a reminder four months ahead, and treat the renewal like the four- or five-figure decision it is.