For many homeowners, mortgage renewal is easy to push to the bottom of the to-do list. The paperwork arrives, a few signatures are added, and another mortgage term begins.
A mortgage renewal isn’t just about extending your loan for another term. It’s an opportunity to reassess your finances, explore your options, and potentially improve your mortgage terms.
Before signing the first offer that lands in the mailbox, it’s worth taking a closer look.
Don’t Treat Renewal as a Rubber Stamp
As your mortgage maturity date approaches, you’ll have a choice to make: stay with your current lender or shop around for a new mortgage provider. Either option can have a significant impact on your finances over the next several years.
Many lenders send renewal offers before the maturity date, making it easy to simply sign and move on. The problem? The first offer isn’t always the best one available.
According to the Financial Consumer Agency of Canada (FCAC), homeowners should take time to review their options, compare offers, and consider whether their current mortgage still fits their financial goals.
Investing a little time in research before renewing could pay off in the form of lower borrowing costs, better terms, and potentially thousands of dollars in savings over the next mortgage term.
Start Looking Early
Mortgage renewal is not something you want to leave until the final week. The earlier you start exploring your options, the more control you’ll have over the outcome.
Beginning the process a few months before your renewal date allows time to compare rates, negotiate better terms, and consider other lenders if they’re offering a more competitive deal.
Has Life Changed Since the Last Mortgage Term?
A lot can happen in three to five years.
Maybe income has increased. Maybe retirement is closer. Perhaps there’s a new baby, a growing family, or plans to renovate.
Mortgage renewal is the perfect time to ask whether the existing mortgage still supports current goals. You should consider asking:
* Are monthly payments still comfortable?
* Is it possible to pay the mortgage off faster?
* Would a shorter amortization save money on interest?
* Is more payment flexibility needed?
* Are there upcoming financial changes to prepare for?
The best mortgage isn’t necessarily the one with the lowest rate. It’s the one that fits real-life circumstances.
Fixed or Variable: Which Makes More Sense Now?
Renewal offers an opportunity to choose a different mortgage type.
A fixed-rate mortgage provides predictable payments and protection from future rate increases.
A variable-rate mortgage may offer more flexibility and could benefit borrowers if interest rates decline, although payments or interest costs can fluctuate.
There is no one-size-fits-all answer. Comfort with risk, financial stability, and future plans all play a role in determining the right choice.
Look at More Than the Interest Rate
A low rate gets attention, but the fine print matters too. It’s important to review your prepayment privileges, any penalties for breaking the mortgage early and if portability options are available if a move is planned. Payment flexibility and lump-sum payment allowances are important to consider as well.
Sometimes a mortgage with a slightly higher rate can offer features that save money or provide valuable flexibility later.
Should You Switch Lenders?
Many homeowners are surprised to learn they don’t have to stay with their current lender.
Renewal is often the easiest time to move a mortgage to another lender because there is generally no prepayment penalty when the mortgage term has ended.
A different lender may offer a better interest rate, more flexible terms or features better suited to current needs
Comparing options can be worthwhile, especially when mortgage balances are still substantial.
Understanding the Stress Test at Renewal
Mortgage stress test rules have changed in recent years.
In many straightforward renewal situations, homeowners renewing with their current lender do not need to requalify under the mortgage stress test. In addition, many borrowers switching lenders at renewal may now be exempt from the stress test if they are simply transferring the existing mortgage without increasing the balance or extending the amortization period.
However, refinancing or borrowing additional funds can trigger new qualification requirements.
Anyone considering major changes should speak with a mortgage professional early in the process.
Watch Out for Payment Shock
Many homeowners who secured ultra-low rates several years ago may see higher payments when renewing today.
The Bank of Canada notes that a significant number of Canadian mortgages are renewing in 2025 and 2026, and some households may experience noticeable increases in their mortgage costs.
Before renewing, calculate what the new payments could look like and adjust household budgets if necessary.
No one enjoys surprises when the first payment comes out of the bank account.
Consider Making a Lump-Sum Payment
If savings have accumulated since the last renewal, making a lump-sum payment could reduce the mortgage balance before entering a new term.
Even a modest payment can lower future interest costs and potentially reduce monthly payments.
It’s worth reviewing the mortgage’s prepayment options before renewal to see what opportunities are available.
The Bottom Line
When your mortgage comes up for renewal, it’s worth taking a closer look before signing on the dotted line.
A lot can change over the course of a mortgage term, and your renewal is an opportunity to make sure your mortgage still fits your needs, goals, and budget. Reviewing your options, comparing offers, and asking questions could help you secure better terms, greater flexibility, or even significant savings.
The homeowners who get the most out of their renewal aren’t necessarily financial experts. They’re simply willing to explore their options rather than automatically accepting the first offer that comes their way.
Mortgage renewal only happens every few years. Taking the time to make an informed decision now can pay dividends long after your new term begins.