Your mortgage renewal is not just paperwork – it’s a powerful financial checkpoint. With rates having climbed significantly in recent years-and come down a bit of late-, automatically accepting your lender’s first offer is one of the most expensive mistakes you can make. Taking the time to review your options could save you thousands over the course of your new mortgage term.
Here is a step-by-step guide to approaching your Canadian mortgage renewal like a financial pro.
1. Start Now: The Critical 120-Day Window
Federally regulated lenders are only legally required to send you a renewal offer 21 days before your maturity date. However, most lenders allow you to renew penalty-free up to 120 days (4 months) in advance.
- Action Item: Find your maturity date and count back 120 days. Use this window to secure a rate hold with your current lender and other competitive lenders. A rate hold locks in a specific interest rate, protecting you if rates increase while you shop around.
2. Reassess Your Financial Goals
Before looking at rates, determine what you need your mortgage to do for you in the next term:
- Payment Reduction: Do you need lower monthly payments? You might consider extending your amortization period (if you have sufficient equity) or choosing a slightly longer term.
- Payoff Speed: Do you have extra cash flow? Renewal is a penalty-free time to make a lump-sum payment directly against the principal. You can also increase your payment frequency (e.g., from monthly to bi-weekly) to pay it down faster.
- Need Access to Cash? If you plan major renovations or debt consolidation, renewal is the time to explore refinancing (which may involve a new stress test and fees) or obtaining a Home Equity Line of Credit (HELOC).
3. The Core Decision: Fixed vs. Variable Rate
This is the most critical decision, as it determines your payment stability and total interest paid.
| Rate Type | Pros | Cons | Current Strategy |
| Fixed Rate | Payment Stability: Your rate and payment are locked in for the entire term. Easy to budget. | Higher Current Rate: Today’s fixed rates are typically higher than variable rates. You miss out if market rates drop. | Short-Term Fixed (2 or 3 years). Many homeowners choose this to ride out the current high-rate cycle, hoping to renew into lower rates sooner. |
| Variable Rate | Lower Starting Rate: Historically cheaper than fixed rates. You benefit immediately if the Bank of Canada cuts its prime rate. | Risk and Volatility: Payments (or the portion of your payment going to principal) can change if the Prime Rate rises. | Consider it if you need the lowest starting payment and have the budget tolerance for potential increases, betting on rate cuts over the next few years. |
4. Shop Around and Negotiate
Never accept your current lender’s first offer. This “posted rate” is rarely the lowest they can offer, as they rely on customer inertia.
- Shop Competition: Take your current renewal offer to a mortgage broker or other lenders (even credit unions, smaller banks). They often have access to discounted rates that are lower than the major banks’ posted offers.
- Negotiate Leverage: Use the best quote you get from a competitor as leverage to force your current bank to match or beat it. This is often the quickest path to a better deal.
- Switching Lenders: If a new lender offers significantly better terms, seriously consider switching. While switching requires a full re-qualification process (credit check, income verification, and possibly passing the stress test if you change the mortgage amount or amortization), the long-term savings often outweigh the one-time legal or appraisal fees.
Key Takeaways for Your Renewal
Take the time to do it right and do your full research, including getting different rates from different places. Your current lender will do their best to keep you, so do get a second or third lower rate and force them to match it or beat it. Even better is if you have multiple products with your mortgage company, be it credit cards, saving or checking accounts, line of credit etc.