Mortgage Renewal

Mortgage renewal is the process of negotiating new terms — primarily the interest rate and term length — at the end of your current mortgage term. In Canada, mortgages are typically structured with short terms (1–5 years most common) attached to long amortization periods (25–30 years). When your term expires, the outstanding balance becomes due in full — unless you renew with your existing lender or refinance with a new one. Most renewals are straightforward: you agree to a new rate and term without changing the amortization schedule or loan amount. Your lender is required to notify you of renewal at least 21 days before the term expires, but proactive shopping should start 4–6 months earlier. See the mortgage renewal strategy guide for a comprehensive playbook.

Renewal and refinancing are often confused: (1) Renewal: renegotiating rate and term at natural term expiry with no change to the outstanding balance or amortization. No new appraisal required by most lenders; lower fees; faster process. You can switch lenders at renewal without paying a prepayment penalty (the term has expired); (2) Refinancing: changing the mortgage terms mid-term — accessing equity (cash-out), increasing the amortization, switching products, or adding/removing a borrower. Refinancing mid-term triggers a prepayment penalty (interest rate differential or 3-month interest, whichever is greater). A new appraisal is typically required; legal fees to discharge and register a new mortgage apply. The key insight: switching lenders at renewal has many refinancing benefits (better rate, new terms) with none of the penalties — making the renewal window the most important financial opportunity in Canadian homeownership. See the prepayment penalty glossary entry for penalty calculation methods.

Start shopping 4–6 months before your renewal date. Most major Canadian banks and lenders allow you to lock in a renewal rate 120 days in advance. This gives you: (1) time to get competing quotes from multiple lenders and your mortgage broker; (2) ability to lock in today's rate in case rates rise before your renewal; (3) negotiating leverage — your current lender's retention team will often sharpen their offer if they know you are shopping; (4) time to complete a new appraisal and legal work if switching lenders. The worst approach: accepting the renewal offer mailed to you 21 days before renewal without shopping. That offer is never your lender's best rate — it is their posted renewal rate, which is typically 0.25–0.75% above what they will offer to a borrower who threatens to leave. The FCAC mortgage guide confirms your right to switch lenders at renewal without penalty.

If you take no action when your mortgage term expires, your lender will typically convert it to an open mortgage at their posted open mortgage rate — which is significantly higher than closed rates (often 1.5–3% above closed rates). This is sometimes called an "open conversion" and is designed to incentivize timely renewal. You will not be in default as long as payments continue. Most lenders hold this open state for 30–60 days, allowing you to renew retroactively at a closed rate. If you genuinely cannot make the payment at term maturity (e.g., extreme financial hardship), contact your lender immediately — they have an incentive to work out a renewal rather than call the mortgage. Practically speaking, your lender will mail renewal offers and follow up proactively — accidental non-renewal is rare but can happen if mail is lost or you have changed addresses. Confirm contact information with your servicer 6 months before renewal. See your OSFI B-20 rights as a borrower at renewal.

For renewals with your existing lender: generally no — existing lenders typically do not re-stress-test borrowers at renewal as long as the mortgage amount and amortization schedule are unchanged. This is a significant benefit of staying with your current lender: even if your income has decreased or your credit has deteriorated since origination, you can renew at current rates without full requalification. For renewals with a new lender: yes — switching lenders triggers a full requalification including the OSFI stress test at the new lender's qualifying rate. This is why some borrowers with tighter finances may stay with their current lender at renewal even at a slightly higher rate — the guarantee of renewal without requalification has real value. The stress test situation at renewal has been a major policy debate in Canada — OSFI exempted same-lender renewals from the stress test in 2023. See the stress test glossary entry.

The "renewal wave" refers to the large volume of Canadian mortgages with 5-year fixed terms originated in 2020–2022 (at historically low rates of 1.5–2.5%) that are renewing in 2025–2027 at rates significantly higher (5.5–7%). For a $500,000 mortgage: at 2.0% fixed = $2,113/month P+I; at 6.0% fixed renewal = $2,998/month — an increase of $885/month or $10,620/year. CMHC estimated that 1.2 million+ Canadian mortgages were renewing in 2025 alone, with significant payment increases for most. Strategies to manage renewal shock: (1) extend the amortization (available to CMHC-insured mortgage holders as of 2023 rule changes); (2) switch to a variable rate if short-term rates are lower; (3) make lump-sum prepayments before renewal if allowed; (4) start shopping early and negotiate aggressively. See Canada mortgage renewal shock 2026 for context.