Mortgage renewal process
Jamie David, Sr. Director of Marketing and Mortgages
Quick facts:
- Mortgage renewal is the perfect time to adjust your mortgage by switching to a new product, term length, or even lender — without incurring penalties.
- As of November 21, 2024, neither insured or uninsured borrowers will be stress tested if switching to a new lender at renewal time, as long as their original amortization and mortgage amount remain the same, and both lenders are federally-regulated financial institutions.
- You can start the renewal process as early as 120 days before your renewal date.
- Comparing the market or working with a pro like a mortgage broker can help you find the best mortgage rate. Did you know: that getting a mortgage rate even 0.25% lower can save a borrower $91 per month, and $1,092 per year!*
*Based on a $700,000 home price, 10% down payment, amortized over 25 years, and a five-year fixed mortgage rate of 4.64% vs. 4.39%.
When your mortgage term ends and you still have a balance to pay, it’s time to renew your mortgage. This isn’t just a routine task, it’s an opportunity to evaluate the features of your current mortgage and determine whether it’s still the best fit for your financial situation and goals.
For example, in 2024, the Bank of Canada made four rate cuts, providing much-needed relief for borrowers after a period of elevated rates. Even more cuts are anticipated as we head into 2025, which could significantly lower borrowing costs in the months ahead. Given the prospect of lower rates in the relatively near future, you might want to think about what type of mortgage (e.g. variable vs. fixed) and what term length would make sense.
Have a look at the video below for some tips on how mortgage renewal works, then read on for more information on the process.
WATCH: How to take advantage of future lower rates
Frequently Asked Questions
What is a mortgage renewal?
A mortgage renewal is the process of renegotiating an existing mortgage when the original term contract expires. For instance, if you have a five-year mortgage term, you’ll need to renew your mortgage at the end of that period either from your existing lender, or a new one. This process will repeat until your amortization period ends and your mortgage is completely paid in full.
Mortgage renewal time is an opportunity for borrowers to assess whether the current features of their mortgages work well for them, and make changes if necessary.
What can affect my mortgage renewal?
Several factors can influence your mortgage renewal, including your financial situation, market conditions, and lender policies. Lenders may consider changes in your credit score, income stability, and debt levels, though this is typically more relevant if you switch lenders rather than staying with your current one. Interest rates also play a crucial role—after four Bank of Canada rate cuts in 2024 and with more expected in 2025, you may have the opportunity to secure lower variable rates. Additionally, a strong payment history can improve your negotiating power, while missed payments might limit your options.
How many Canadian mortgages are up for renewal in 2025?
According to data released by the Canada Mortgage and Housing Corporation (CMHC), approximately 1.2 million fixed-rate mortgages will be up for renewal in 2025. This represents over $300 billion in outstanding mortgages.
Will mortgage rates go down in 2025 in Canada?
Mortgage rates in Canada are expected to continue decreasing into 2025. The Bank of Canada has already implemented four rate cuts in 2024, bringing the policy rate down to 3.75%. Experts anticipate further reductions in 2025, potentially lowering the rate to a range of 2.25% - 3.00%, depending on economic conditions. These rate cuts aim to ease borrowing costs, making it an opportune time for homeowners and prospective buyers to secure lower variable mortgage rates. However, the pace and extent of future cuts will depend on factors such as inflation trends and the overall economic outlook.
Fixed mortgage rates, while not directly influenced by the Bank of Canada, have already seen slight discounts, as a result of lower bond yields; this is due to investors reacting favourably to expectations that the central bank rate hikes are over. If this trend continues, we can expect fixed mortgage rates to be discounted further.
Also read: Renewing your mortgage in 2024? Here’s what to expect
What questions should I ask when renewing a mortgage?
When renewing your mortgage, asking the right questions can help you secure a term that aligns with your financial goals. Start by inquiring about the interest rate and term length your lender offers, and compare these with market rates to determine if switching lenders could provide better value. It’s also important to explore other product features during renewal, such as extending your amortization to reduce monthly payments, switching from a fixed to a variable rate, or choosing a shorter-term mortgage if you expect to pay off your mortgage sooner.
If you anticipate moving within the next year, ensure your renewed mortgage includes a portability feature or explore open-term options that allow greater flexibility. Don’t forget to ask about payment schedules or any fees for switching lenders. Discuss refinancing options if your financial needs have changed, such as funding renovations or consolidating debt.
Can you be denied a mortgage renewal in Canada?
While it’s rare to be denied a mortgage renewal from your existing lender, it can happen; if your financial situation has materially declined (due to defaulting on loan payments, job loss, etc.), then your lender may not renew your existing loan.
If this happens to you, there are options; you may need to take out a different type of term, or seek out financing instead from an alternative lender.
Learn more: What happens if your mortgage renewal is denied?
Do I have to renew my mortgage?
Yes, you must renew your mortgage if you still have an outstanding balance at the end of your mortgage term. A mortgage term typically lasts between one and five years, and when it expires, you’ll need to either negotiate a new term with your current lender or switch to a new lender.
Failing to renew your mortgage proactively could result in your lender automatically renewing it for a new term, often at less favorable rates or conditions. To ensure you get the best possible terms, it’s important to start the renewal process early, explore your options, and consider changes to your mortgage features.
Should I renew my mortgage for 3 or 5 years?
It depends on your financial goals and priorities. In Canada, 5-year mortgage terms are the most popular and often come with the most competitive rate pricing, making them a good choice for borrowers seeking stability and predictability over a longer period.
On the other hand, a shorter term, such as a 3-year mortgage, offers greater flexibility if you anticipate significant changes in your financial situation, such as selling your home, moving, or expecting interest rates to decline further.
Can you pay off your mortgage at renewal without penalty?
Yes, you can typically pay off your mortgage at renewal without penalty. Unlike breaking your mortgage mid-term, which often incurs prepayment penalties, the renewal period allows you to make significant changes to your mortgage, including paying off the remaining balance in full. This is because your original mortgage term has ended, and you’re not locked into any further obligations under that contract. If you have the financial means to pay off your mortgage at renewal, it’s a great opportunity to become mortgage-free without additional costs.
What is the difference between a mortgage renewal and a refinance?
A mortgage renewal simply refers to taking out a new term for your mortgage when your existing one is up, either with your current lender or with a new one. You will not pay any penalty to renew your mortgage, even if you switch to a different lender. It is simply an extension of your original contract, and the terms of your balance remain the same.
Refinancing your mortgage, however, means ending your current mortgage and starting a new one. This can be done with either your existing provider, or with a new one. However, if you refinance your mortgage in the middle of your term, you may need to pay a penalty for breaking your mortgage. Refinancing your mortgage also allows you to change the loan amount and even pull cash out of the existing equity you’ve built up.
Check out our mortgage refinance calculator to learn more about this option.
Compare today’s lowest mortgage rates
Saving on your home purchase starts with the lowest rates. Let Ratehub.ca help you compare the best Canadian lenders.
Tips on how to renew your mortgage
Your current mortgage provider generally wants you to stick with them at renewal time, and will even send you a renewal slip in the mail that you could easily sign and send back – but if you want to ensure you’re getting the most out of your mortgage, we suggest taking a proactive approach with your next mortgage renewal. First, check out this helpful video with some tips for mortgage renewal in 2024. Then, read on to learn more about the process.
WATCH: 3 tips for renewing your mortgage in 2024
1. Start shopping 4 months before your term is up
Mark your current mortgage term’s maturity date on your calendar, then count back 120 days (around 4 months) to mark when you can start preparing. This is when most lenders will let you start the early mortgage renewal process, meaning you could renew early with your current lender without having to pay a prepayment penalty (for breaking your term early). It’s also the perfect time to start exploring your options.
Even if you’re not ready to meet with your mortgage broker or lender immediately, you can use this time to find the best renewal rates, prepayment privileges, and other terms from different lenders. Look for lenders that offer rate holds—these allow you to lock in today’s rates for up to 120 days, protecting you from potential increases while you finalize your renewal. This ensures you have the flexibility to shop around while securing a competitive rate.
- 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!
2. Consider your financial goals
Let’s face it: a lot can happen over the course of a current mortgage term. Your financial goals when you first signed your mortgage may no longer align with your current situation. For example, you could have received a substantial raise at work, lost some income, or even retired. Life events like having a baby or preparing to pay for your child’s university tuition can also impact your financial priorities.
If there’s any chance you’ll need to move in the next five years, or if you’re thinking about accessing some of your home equity, these factors should influence your choice of mortgage rate, term, and product. Be sure to weigh your current and future needs carefully when deciding on the terms for your renewal.
3. Outline your mortgage needs
Along with your other financial goals, you should make a list of what you’re looking for in a mortgage product. To start, ask yourself a few questions:
- Does your monthly budget have room for you to increase your mortgage payment amount? If so, review the monthly prepayment options in the terms and conditions. Increasing the size or frequency of your mortgage payments can help you pay down your principal faster, potentially saving thousands of dollars in interest over the course of your mortgage.
- Will you receive any bonuses or inheritances? If so, check for lump-sum prepayment options. This feature allows you to put extra funds toward your mortgage principal.
- Do you think you’ll have the option to pay off your mortgage entirely, in this next term? If so, consider the prepayment penalties that go with fixed vs. variable rate mortgages.
- Do you think you will want to borrow more money from your lender during this next term? If you may need to refinance, consider the associated penalties or explore collateral mortgages, which are designed to accommodate future borrowing needs.
- Is there any chance you’ll be selling your home and/or moving in the next 5 years? If so, you may want a mortgage that is portable or assumable to make transitions smoother and potentially save on costs.
4. Be ready to renew in the last 30 days
By law, your current lender has to send you a mortgage renewal statement at least 21 days before your term is up, but they will usually mail you a renewal offer for their lowest posted rate that is good for the 30 days before maturity. By extending that offer for 30 days, you’re protected from any potential rate increases during that time. At this stage, you should have done enough research to know if your lender’s offer is competitive. If it isn’t, don’t hesitate to negotiate.
Keep in mind that your current lender might not provide the most favorable rate even after negotiation. To ensure you’re getting the best deal, use these last 30 days to meet with a mortgage broker, who can help you compare offers from other lenders and secure a better rate or more favorable terms.
Read: Should you switch from a variable-rate to a fixed-rate mortgage?
5. Make a decision
After shopping around, considering your financial goals, outlining your mortgage needs and receiving a mortgage renewal offer from your current lender, it’s finally time to make a decision. The last question you’ll need to ask yourself is who is offering you the best mortgage rate and product: your current lender or another lender? If you decide to stay with your current lender, you can either choose to sign and return the mortgage renewal offer they sent in the mail or sit down and try to negotiate a better offer in their offices.
Switching providers will require a little more paperwork, but you’ll find that doing so will give you access to better mortgage rates. Just be prepared to submit a mortgage application, as the new lender’s qualifying criteria might be different from that of your current lenders. Additionally, there may be fees involved with making the switch, such as:
- Appraisal fee: To verify your property’s value ($150–$500)
- Discharge fee: Charged by your current lender ($5–$395)
- Assignment fee: If applicable ($25–$300)
- Legal fee: For finalizing the transfer (up to $1,500).
Some mortgage brokers or lenders may offer to cover part or all of these fees to earn your business, but others may not, so be prepared to pay these costs upfront. Weighing the benefits of switching against these expenses will help you decide if making the move is worth it.