How Mortgage Renewals Work and How To Prepare for Yours
If you’re like many Canadian homeowners, you’ve got a mortgage renewal in your future. Here’s what to know ahead of time.
Updated 
12 min. read
A mortgage renewal involves signing a new agreement, with either your current lender or a new one, to continue your mortgage once your existing term is up.- Renewal time presents the perfect opportunity to reassess and renegotiate your current mortgage contract.
- You may look for a lower interest rate, better payment terms, a different mortgage structure, or even a new lender.
- Evaluating your finances, doing market research, and starting early are crucial when preparing to renew.
If you’re among the 35.5% of Canadians with a mortgage, you also likely have a mortgage renewal in your future. But what exactly happens at renewal, and how can you ensure there are no surprises?
This guide breaks everything down, from preparing ahead of time to signing your new agreement, plus some helpful tips to make the entire process smooth. Let’s get started!
What is a mortgage renewal?
Mortgage renewal is the process you go through when your current mortgage term ends, provided you still have an outstanding balance. To continue your mortgage, you’ll need to sign a new agreement with updated terms and conditions.
At renewal, you have the opportunity to review or adjust different aspects of your mortgage including payment frequency, term length, and interest rate. You may also be able to make a lump-sum payment or even switch lenders altogether.
Because rates can change over time, your mortgage payments could increase or decrease at renewal, so it’s important to plan ahead, do your research, and shop around.
Key mortgage renewal terms
To fully understand the mortgage renewal process, you’ll want to get familiar with a few key terms:
Term | Definition |
|---|---|
Mortgage principal | The amount left owing on your mortgage, excluding interest. |
Mortgage term | The length of time your mortgage contract is in effect before renewal, during which your interest rate and payment terms apply. |
Mortgage rate | The interest rate charged by your lender on the outstanding balance of your mortgage. It plays a key role in determining how much interest you pay over time. |
Fixed interest rate | A mortgage rate that’s locked in for the duration of your mortgage term. |
Variable interest rate | A mortgage rate that can change over time, typically based on the prime rate. |
Mortgage payment | The amount you regularly pay toward your mortgage, which typically includes principal, interest, and creditor insurance premiums if applicable. |
Maturity date | The date your current mortgage term ends and is due for renewal. |
Amortization | The total length of time you will need to pay off your mortgage in full. |
When should you renew your mortgage?
Unless you’ve paid off your mortgage in full, you’ll need to renew it when your current term is up. Terms can range anywhere from a few months to 10 years, with most falling in the 2-to-5-year range. For example, if you took out a mortgage in 2024 on a 3-year term, you’re looking at a 2027 renewal.
What happens when it’s time to renew a mortgage?
In Canada, federally regulated financial institutions are required to send you a notice in advance of your renewal date. This will have all the information you need to renew, including your remaining balance, rate, and proposed new term. It may even include an offer that you can sign and return if you’re satisfied with the terms.
If you miss that notification or don’t respond, your lender might automatically renew your mortgage at their current posted rate, often using a standard or existing term length. These may be less favourable than what you could get by negotiating or shopping around, so it’s crucial to be proactive.
Early renewal
Many mortgages give you the option of renewing before your maturity date, often as early as 120 to 180 days in advance. Early renewal can be a good strategy if interest rates are expected to increase, as you can lock in a lower rate beforehand.
On the flip side, renewing earlier than your lender’s penalty-free window could mean paying additional fees or being locked into unfavourable terms if rates drop after you renew. So, it’s important to review the numbers carefully before you sign.
Best practices for renewing your mortgage
Here are a few key mortgage renewal tips to get you started:
Start early
Don’t let your renewal date sneak up on you. It’s wise to give yourself as much time as possible to weigh your options and gather what you need. Starting early may also allow you to lock in a rate before maturity, taking some pressure off the decision-making process.
- Mark your calendar 4–6 months out, as you may be able to renew early without penalty.
- Download and read your mortgage renewal statement carefully.
Assess your current situation
Your renewal can impact your financial picture for the next few years, so give your finances and mortgage documents a solid review.
- Consider your current mortgage’s outstanding balance, interest rate, payment frequency, and maturity date.
- Take stock of any recent changes to your income, expenses, debts, or savings.
- Check your credit score through online banking or Equifax and take steps to make improvements if need be.
- Re-evaluate your financial goals: do you want to pay off your mortgage faster or keep payments more flexible?
Do some market research
Renewal is also a chance to shop around and consider what’s available, both with your current lender and across the broader market.
- Review your current lender’s posted rates and terms.
- Use an online rate comparison tool to review rates across multiple lenders.
- It’s also important to look into customer support and service quality levels.
- Keep an eye on broader trends, such as changes in Bank of Canada policy or the housing market.
- Explore lump-sum options that can help reduce your principal before renewing, estimating payments with a mortgage renewal calculator.
If you still have questions or want personalized guidance, consider making an appointment with an expert at BMO. It’s completely free, and scheduling a time to meet based on your availability is quick and straightforward.
Negotiate and review your options
In the same way you aren’t locked into your current lender, you also aren’t obligated to take the first renewal offer a lender gives you.
- Don’t assume the first offer you see is your best or only option.
- Compare offers and discuss them with your current lender to see whether alternative terms are available.
- Review the additional details that matter to you, including prepayment privileges, penalties, and flexibility. (These features can vary by lender and mortgage type.)
Remember, while you can choose to renew, refinance, or pay off your mortgage, your maturity date can’t be ignored or rescheduled, so it’s important to track deadlines closely.
Key decisions during renewal
Once you’ve gotten up to speed with the current mortgage market, you’ve got some important decisions to make:
Choosing a new term length
You’ll need to decide how long your rate and payment structure will be locked in for, which depends on your finances, comfort level, and lender.
- Shorter terms (1–3 years) offer flexibility but often come with slightly higher interest rates. They may suit you if you plan on selling or want the option to adjust your rate sooner.
- Longer terms (4–10 years) provide rate stability and payment predictability, which can be appealing if rates are low or expected to rise.
Deciding on a fixed or variable interest rate
You’ll also need to choose between a fixed or variable mortgage rate.
- Fixed-rate mortgages lock in your rate for the entire term, reducing the risk of unexpected interest rate increases and making payments more predictable.
- Variable-rate mortgages move with changes to the prime rate, meaning your interest rate, and potentially your payments, may increase or decrease over time. This option may offer more flexibility but also comes with more variability and risk.
Open rate vs. closed rate
Another important decision is whether to go with an open or closed mortgage.
- Open mortgages typically allow penalty-free lump-sum or early payments but come with a higher interest rate.
- Closed mortgages usually offer a lower interest rate but may limit how much you can prepay without penalty.
If you're expecting to come into some money and want to pay your mortgage off earlier, an open mortgage may be worth the trade-off.
Adjusting payment size and frequency
You can also renegotiate how much you pay and how often, within the terms of your mortgage, which together affects your amortization schedule.
Increasing your regular payment amount requires more available funds but reduces your principal faster, shortening amortization and lowering total interest. Decreasing payments can ease cash flow but may increase total interest over time.
Payment frequency works similarly. Switching from monthly to accelerated bi-weekly payments, for instance, can reduce interest and shorten the time to pay off your mortgage, while lowering your payment frequency can ease monthly strain but may increase total interest. Ultimately, whether you opt for smaller, more frequent payments or larger, less frequent ones comes down to what best fits your budget.
Renewing with a different lender
For many homeowners, switching lenders can help secure a better mortgage rate or more favourable terms. A new lender may offer promotions for new clients or more competitive rates, so remember to look around.
If you decide to switch, you might need to submit a new application to requalify, or pay some upfront fees, but a lower rate can make it all worthwhile in the long run.
Negotiating a better rate
Mortgage rate negotiation can make a big difference in what you’ll pay over time. Here are a few factors you’ll want to be well-versed in to get the best rate possible:
- Posted rate: The rate a lender advertises publicly. This is not always the rate you’ll ultimately pay.
- Discounted rate: A rate that may be available based on factors such as the mortgage product, term, and your financial profile.
- Terms and features: In addition to rate, you can also negotiate perks like payment flexibility.
- Credit score: A high credit score and consistent repayment history can strengthen your negotiations, as they signal lower risk.
If you’d rather have an expert handle it, you can always speak with a licensed mortgage broker who can help you compare your options and negotiate on your behalf.
Common mistakes to avoid
As you now know, renewing a mortgage comes with a lot of variables, but they are manageable. Being aware of these common pitfalls can help you avoid costly mistakes:
- Auto-renewing without reviewing terms
- Immediately going with your first offer
- Ignoring changes in your financial situation
- Missing the renewal deadline
Renewing your mortgage with BMO
Once you’ve settled on a lender, rate, and terms, it’s time to renew. With the hard work out of the way, all you’ll need to do now is follow a few simple instructions online, by phone, or in person at a branch.
If you’re a BMO client or are considering switching to BMO, you’ve got a few options:
- Renew your mortgage over the phone at 1-877-594-0082.
- Visit us at your local BMO branch.
If you want to learn more about renewing your mortgage online with BMO, check out our interactive demo explaining the whole process.
The bottom line
Renewing your mortgage might not be as complicated as qualifying for one in the first place, but it’s still a major consideration that can affect your financial situation and plans for years to come. As such, it’s important to prepare for your renewal well in advance, take the time to consider your finances and current mortgage, and look around to see what other lenders are offering.
With careful research and planning, you can secure a mortgage renewal that aligns with your goals and ideally improves your current mortgage terms.
Mortgage renewal Frequently Asked Questions
Renewing your mortgage with your current lender usually only involves signing a renewal agreement, without the need to provide any additional documents. If you’re refinancing or extending your amortization, your lender may request updated proof of income or a new credit check.
If you decide to switch lenders or refinance, you should expect a more detailed approval process. This can include providing proof of income, a credit report, government-issued ID, a current mortgage statement, a property tax bill, proof of home insurance, and in some cases, a recent property appraisal.
Yes, you can pay off your mortgage at renewal (when your mortgage term ends). You can usually pay off your mortgage in full with a lump-sum payment without a prepayment penalty.
If you renew your mortgage as‑is with your current lender, they usually won’t perform a credit check. However, if you want to increase the size of your loan or switch lenders, you will likely need to undergo a credit check.
The biggest difference between mortgage renewal and refinancing is that a renewal allows you to negotiate a new rate and term on your existing mortgage balance, typically without changing your loan structure or triggering additional costs. As a result, changes to your payment are mainly driven by the new interest rate you choose.
Refinancing, on the other hand, involves replacing your existing mortgage with a new one. Because it’s treated as a new lending decision, refinancing is priced based on current credit approval and product pricing, and may involve fees. These factors can result in bigger changes to your payments and total borrowing cost. Ultimately, the right choice for you depends on your goals and needs as a homeowner.
It is very rare for your mortgage renewal to get denied, but it can happen. If it does, the balance owing becomes due and must be paid in full. In these cases, homeowners often look to secure funding from another lender, refinance if possible, or sell the property to pay off the mortgage. Taking timely action is important to avoid further financial challenges such as mortgage default, foreclosure, or power of sale.
Ready to renew your mortgage?
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