Introduction
For the majority of Canadian homeowners, their mortgage does not run for the full length of their amortization period without interruption. Instead, mortgages are structured in terms — typically one to five years — at the end of which the remaining balance must be renewed at the prevailing market rate or with a new lender. The renewal process is one of the most important financial events in a homeowner’s life, yet it is often approached passively.
Understanding the Renewal Process
Approximately three to six months before your mortgage term expires, your existing lender will contact you with a renewal offer, typically via mail. This offer will specify the new interest rate, term options, and payment amounts at the offered rate. Many homeowners simply sign and return this offer without exploring alternatives — a significant financial mistake in a competitive mortgage market.
Shop Around at Renewal
Mortgage renewal is one of the best opportunities to significantly reduce your interest costs. Unlike during your original mortgage term (when breaking your mortgage would trigger substantial prepayment penalties), renewal gives you the freedom to switch lenders without penalty. Studies have consistently shown that homeowners who shop around at renewal secure meaningfully better rates than those who simply accept their existing lender’s renewal offer.
Contact your mortgage broker or solicit competing offers from other lenders several months before your renewal date. Your existing lender will often match or improve on competitor rates if presented with a legitimate competing offer.
Renewal in 2026: The Rate Environment
Many Canadian homeowners are facing mortgage renewals in 2025 and 2026 with mortgages that were originally taken out during the low-rate period of 2020 and 2021, when rates were near historic lows. For these homeowners, renewal at current rates — even with the Bank of Canada’s recent cuts — represents a significant payment increase. Planning ahead, paying down the principal aggressively before renewal, and locking in a rate as early as possible (many lenders allow rate holds 90 to 120 days before renewal) are all strategies worth considering.
Changing Terms at Renewal
Renewal is also an opportunity to adjust your mortgage terms — changing from a fixed to a variable rate (or vice versa), shortening your amortization period, or accessing equity through a refinance. If your financial circumstances or the rate environment have changed significantly since your original mortgage, renewal is the right time to reassess your strategy.
