Understanding what happens when your Canadian mortgage term ends — and when refinancing makes more sense than simply renewing.
Unlike in the United States where 30-year fixed mortgages are common, Canadian mortgages are structured in shorter terms — typically 1 to 5 years — that are renewed at the end of each period. This means most Canadian homeowners will renew their mortgage multiple times over their amortization period. Understanding what happens at renewal — and what your alternatives are — can save you tens of thousands of dollars over the life of your mortgage.
When your mortgage term ends, your lender will send you a renewal offer — usually 3–4 months before your term expires. This offer outlines the rates and terms they're willing to offer for the next term. You have three choices: accept the renewal as offered, negotiate with your current lender for better terms, or switch to a new lender.
Renewal is the most common and straightforward option. You continue with the same amortization clock ticking down — only the rate and term are renegotiated. There's no new stress test required if you stay with the same lender (though switching lenders does require passing the stress test again).
Refinancing means replacing your existing mortgage with a new one — typically to access your home equity, consolidate debt, or get a significantly better rate. Unlike renewal, refinancing involves breaking your current mortgage (usually incurring a penalty) and starting a new mortgage with a new amortization period.
Common reasons Canadians refinance:
Don't accept the first offer. Lenders often send renewal offers that are not their best rates, especially to borrowers they expect will simply sign and return the form. The renewal offer is a starting point for negotiation, not a take-it-or-leave-it proposition.
Shop around early. Start looking at other lenders 4–6 months before your renewal date. Get competing quotes. Even if you plan to stay with your current lender, having a competing offer gives you negotiating leverage.
Consider a mortgage broker at renewal. Brokers can access wholesale rates that aren't publicly advertised and can shop your renewal across many lenders simultaneously.
Watch for renewal penalties at new lenders. Switching lenders at renewal typically has no penalty (your term has expired), but the new lender may require legal fees and an appraisal. Some lenders cover these costs as part of a promotional offer.
Refinancing before your term expires involves breaking your mortgage, which typically triggers a penalty. For fixed-rate mortgages, this is usually the Interest Rate Differential (IRD) — a calculation that can be very large if rates have fallen since you locked in. For variable-rate mortgages, the penalty is typically just 3 months' interest.
Refinancing generally makes sense when:
If you need access to equity without fully refinancing, a HELOC (Home Equity Line of Credit) may be an option. A HELOC allows you to borrow against your equity up to 65% of your home's appraised value (combined with your mortgage, the limit is 80%). Interest is charged only on what you use, and you can repay and re-borrow as needed. HELOCs typically have variable rates tied to prime.
If you're selling one home and buying another, you may be able to port your mortgage — transfer it to the new property without penalty. Not all mortgages are portable, and porting rules vary by lender. If you're buying a more expensive property, you'll blend your existing rate with a new rate for the additional amount.