5 tips for mortgage renewal time
Key takeaways for renewing your mortgage in 2025:
- Many lenders will allow you to renew your mortgage up to 120 days before the end of your term.
- Did you know, you don't have to renew with your lender? You can usually get a lower rate by switching at renewal. In fact, walking into your current bank and re-signing at renewal often means leaving money on the table. Your existing lender has less incentive to provide you with the most competitive rates, as they already have your mortgage business.
- If possible, reduce your overall mortgage size before renewal by making a lump sum or accelerated monthly payment.
This article was originally written on August 18, 2014 and was updated on November 26, 2024.
Most mortgages need to be renewed at least once before they’re eventually paid off. If you don’t have the funds to pay off your remaining balance after your initial term, you’ll likely join over 2 million Canadians preparing to renew their mortgages in 2025 and 2026.
Additional data from the Canada Mortgage and Housing Corporation (CMHC) finds that roughly $300 billion in fixed-rate mortgages will be up for renewal next year alone. In fact, 85% of these mortgages were originally contracted when the Bank of Canada’s overnight rate was at or below 1%.
A key challenge facing these borrowers is that they’ll be renewing their mortgages in a considerably higher interest rate environment; both fixed and variable mortgage rates have soared by over 275 basis points since their pandemic-era lows. The BoC forecasts that, depending on the type of mortgage they have, renewing borrowers can expect their monthly payments to increase between 25 - 54%.
Also read: The state of mortgage renewals in Canada: Insights from CMHC
With this in mind, it’s more important than ever that mortgage holders understand their options at renewal time, and make a strategic choice to help minimize the impact of potentially higher payments. Check out the helpful video below, then read on for more information.
- Did you know: You don't have to renew with your lender? You can usually get a lower rate by switching at renewal. Your existing lender has less incentive to provide you with the most competitive rates, as they already have your mortgage business. Auto-renewing means leaving money on the table.
- You could save $13,857 on average by switching with Ratehub.ca vs renewing with your bank. Speak to a Ratehub.ca mortgage agent today to see how easy switching can be.
- Switching comes with cash bonuses of up to $4,000 - that could buy you a vacation!
What is a mortgage renewal?
A mortgage renewal is simply the process of taking the outstanding balance of your mortgage and renewing it for another term at a new (and hopefully lower) mortgage rate.
If you don’t already have the maturity date (the date your mortgage term ends) pencilled into a calendar, you’ll know it’s time to renew when your current mortgage provider sends you a renewal slip in the mail. The slip includes a new mortgage rate and term offer, which you can sign and send back.
However, it’s in your best interest to take a more proactive approach, especially in today’s high interest rate environment. Even though the Bank of Canada has cut its key Overnight Lending Rate four consecutive times between June 2024 and October 2024; today’s lowest variable-rate pricing is 4.85%, compared to the 0.9% available in the first months of 2022. Fixed mortgage rates have also been on the rise in response to increasing bond yields. As of November 2024, the bond yields are settling back down to the 3.1% range, but fixed rates remain elevated compared to early 2022, with the lowest available today at 3.99%.
Overall, if you’re renewing your mortgage in 2025, you’ll almost certainly be taking on a higher mortgage rate than you had five years ago. In this mortgage environment, where rates are currently elevated but there's the promise of more rate cuts (and, therefore, lower rates) in 2025, it's also important to think about what kind of mortgage you want in order to best take advantage of the situation.
Have a look at this video, then read on for more tips on mortgage renewal.
Here are our top mortgage renewal tips for reducing the financial impact:
1. Consider your current financial goals
Before you sign your mortgage renewal slip and send it back, you should first review your financial goals. You want to be sure your current provider can offer a mortgage product that suits your needs. For example, if your current mortgage term is a 5-year fixed rate, the renewal slip will likely be for another 5-year fixed. If you think you’ll stay in your home for that amount of time, great. But if you know there’s a chance you’ll downsize or potentially move to a new city in the next few years, you may want to look for a 3-year product instead.
Consider how upcoming financial changes could impact renewing mortgage in Canada:
- Extra income: Are you expecting an inheritance or a significant bonus? This extra money could affect your pre-payment options, allowing you to pay down your mortgage faster and save on interest.
- Refinancing needs: Do you need to access your home's equity for renovations, investments, or other expenses? Refinancing or obtaining a HELOC might be beneficial.
- Amortization period: If you're looking to reduce your monthly payments, extending your amortization period could help. Use our amortization calculator to see how different lengths affect your payments.
Knowing what you need in a mortgage should help you form the decision about which lender and product to choose.
2. Start to shop around early
Just how soon can you renew a mortgage? Even if your maturity date is still months away, getting a head start can offer significant benefits — the early bird truly gets the worm in the mortgage renewal process.
While your current lender will likely send you a renewal slip during the last 30 days of your mortgage term, you don't have to wait for it. Most lenders allow you to begin negotiations up to 120 days before your maturity date. To take advantage of this opportunity, locate your maturity date on your mortgage contract (it may also be visible through online banking) and count back 120 days to mark the date on your calendar.
If you can’t negotiate a better offer with your current lender, you can start considering switching providers to get better interest rates and mortgage terms. You can secure a rate hold with potential new lenders, typically for up to 120 days, protecting you against possible rate increases while you explore your options. You may not be able to switch your mortgage over until your actual renewal date arrives, but this gives a mortgage broker time to give you mortgage renewal advice and find the best product. It also allows time to get the paperwork ready so you’re not left scrambling at the last minute.
3. Ask for a better mortgage rate
With those little mortgage renewal slips, lenders make it too easy for you to answer the "should I renew my mortgage now?" question by providing a quick and easy way to renew. They know you’re busy and that you’ll pay for this convenience. While it might be tempting to sign and return the slip without a second thought, doing so could mean missing out on significant savings. These initial offers often include a small discount off the lender's posted rates but are rarely the lowest rates available—even from your current lender.
Negotiating mortgage renewal for a better rate becomes even more important in a rising rate environment, such as the one we are in today. Here’s a chart outlining how much you could save by asking for a better rate on a $500,000 mortgage with a 25-year amortization.
Let’s say your mortgage matures next month and that you had previously agreed to a 5-year fixed rate at 2.99%. Your current lender may offer you a discount of 0.25% off the posted rate of 5.22% for a new rate of 4.97%.
That would mean monthly payments of $2,913. However, shopping around could allow you to find a much better rate for the next five years. Maybe you’ll secure a 5-year fixed rate at 3.99%. If you were to qualify at that rate, your monthly payments would be a more manageable $2,639, saving you $274 per month.
Some people are too scared to try and negotiate with lenders; they think that what they see is what they get, but it’s simply not true. Lenders often expect borrowers to negotiate and may be willing to offer better rates to keep your business. If your current lender isn't able to provide the best mortgage rate, it's worthwhile to explore options with other lenders.
Many borrowers who choose to switch to a new lender at renewal time may also dodge the mortgage stress test. As of November 21, Canada’s banking regulator, OSFI, announced that uninsured borrowers making a straight switch from one federally regulated lender to another would be exempt from the stress test. This is in addition to insured borrowers, who’ve been exempt from the stress test during renewal switches since January 2024.
4. Get a rate hold
When you shop around for a better rate, a good strategy is to use a mortgage broker. Instead of approaching multiple lenders individually—which can be time-consuming and may negatively impact your credit score if too many hard inquiries are made on it—a mortgage broker can pull your credit report once and present you with a variety of options from different lenders. Your mortgage broker can easily tell you what rate you could qualify for if you choose to switch lenders.
This process can happen very quickly, often at the first appointment. If you aren’t ready to make a decision, for example, if you want a chance to let your current lender match that rate, ask your mortgage broker for a rate hold. Rate holds protect you from interest rate increases for up to 120 days. If interest rates go down during that time, don’t worry; you can negotiate down to that new lower rate, too. This means you get the best of both worlds: security against rising rates and flexibility to benefit from falling ones.
5. Give yourself time to switch lenders
If you decide to switch lenders, you may be wondering – when should I start looking to remortgage? The answer is as early as possible. You’ll need to submit a mortgage application as though you are applying for a new mortgage, which means you’ll need to provide documentation including:
- Copy of your mortgage renewal letter
- Proof of income
- Proof you own your home
- Proof of property insurance
Additionally, the new lender may require a professional appraisal of your property to confirm its current market value.
It usually takes a mortgage broker over a week to process your application, so make sure to leave plenty of wiggle room between when you start the process and when your mortgage is due to renew. You also need to factor in certain fees that come with switching lenders:
- Discharge fees: Your current lender may charge a fee to release your existing mortgage.
- Appraisal fees: Costs associated with having your property professionally appraised.
- Legal fees: Fees for a lawyer or notary to handle the transfer and registration of the new mortgage.
Switching to a new provider can also make you eligible for cashback or bonuses of up to $4,000 - check out the latest mortgage renewal rates to learn more.
The risks of not comparing mortgage rates
It may seem like a lot of effort to shop around for a new lender, and the payoff (saving a few percentage points off your mortgage rate) may not seem worth it at first. However, not shopping around could leave you financially vulnerable. This vulnerability is due to something called ‘interest rate risk’. Interest rate risk occurs when your mortgage is expected to renew at a higher rate, putting more financial strain on your budget. During the pandemic, many highly indebted Canadian households took advantage of historically low rates and took on mortgages, which in turn subjected them to interest rate risk. In the wake of successive, substantial rises in interest rates over the course of 2022 and 2023, understanding interest rate risk is more important than ever.
Interest rate risk occurs in three scenarios for homeowners in Canada, wherein rising interest rates affect you immediately:
- If you have a variable-rate mortgage- Your interest rate and possibly your payment amount fluctuates with market rates. When interest rates rise, your payments can increase significantly.
- If you have a fixed-rate mortgage coming up for renewal- You may have to renew at a higher rate if market rates have increased since you first took out your mortgage. This can lead to higher monthly payments.
- If you have a home equity line of credit with a variable interest rate- As rates rise, the cost of borrowing against your home's equity increases, affecting your overall financial obligations.
In these cases, renewing your mortgage at a higher rate (or refinancing to access equity) could add hundreds of dollars to your monthly mortgage payment, as we saw in the example above. Whether you are choosing renewal vs. refinance, the bottom line is the same: these hundreds of dollars could be the difference between paying down debt and just making ends meet. For this reason, it’s important to take the time to shop around for the best mortgage rate – your financial prosperity depends on it.
The bottom line
Renewing your mortgage can be quick and easy with your current lender. However, signing that renewal slip and sending it back won’t get you the best mortgage rate or product. By following these tips, doing your research, and working with a mortgage broker who can provide you with mortgage renewal advice and tips, you’ll get the best lender, terms, and rate for your current financial situation.