Renewing Your Mortgage in a Higher-Rate World
If your mortgage term is up for renewal, there's a good chance the rate you locked in years ago is nowhere close to what's on offer today. That gap can mean a real jump in your monthly payment, but you have more control over the outcome than most homeowners realize — as long as you start early and understand your options.
Renewal isn't refinancing — know the difference
Your mortgage term (often 1 to 5 years) is not the same as your amortization (the total years it takes to pay off the loan). When your term ends, your mortgage matures and you must renew it, either with your current lender or a new one. This is different from refinancing, which means changing the terms of your loan mid-term — for example, borrowing more against your home equity — and usually triggers new qualification rules and possibly a penalty.
A straight renewal at maturity, with no change in loan amount or amortization, is generally the simplest and cheapest move you can make. That's exactly why it's worth pausing before you sign whatever your current lender mails you, since a plain renewal is also the moment you have the most leverage to negotiate or switch.
Keep reading: Mortgage Payment Calculator · Savings Goal Calculator. For the official rules, see Financial Consumer Agency of Canada.
Why this renewal cycle feels different
Many homeowners who locked in five-year fixed rates during 2020 and 2021, when rates were unusually low, are now renewing into a market where borrowing costs are meaningfully higher. That combination — a low starting rate and a higher renewal rate — is what's driving the payment increases you may be hearing about.
The exact rate you'll be offered depends on your lender, your credit profile, the mortgage product, and where the Bank of Canada's policy rate and bond yields sit at the time. Those numbers move regularly, so treat any specific rate you see quoted online as a starting point for a conversation, not a guarantee — confirm current rates directly with lenders or a mortgage broker.
Your options at renewal
You typically have more choices than "accept and sign." Understanding each one before your renewal deadline puts you in a stronger negotiating position.
- Accept your current lender's offer: the path of least resistance, but their initial renewal letter is rarely their best rate — it's a starting offer.
- Negotiate with your current lender: call and ask for a better rate, especially if you can show a competing offer in writing. Lenders would rather keep your business than lose it to a competitor.
- Switch lenders: moving your mortgage to a new lender at renewal (a "switch") can unlock a better rate, but involves paperwork, a new appraisal in some cases, and legal fees your new lender may or may not cover.
- Blend and extend: if you're mid-term and rates have moved, some lenders will blend your existing rate with the current rate for an extended term, avoiding a prepayment penalty. This is worth asking about even outside your renewal window.
If you switch lenders at renewal without increasing your loan amount, you may not need to requalify under the mortgage stress test — but practices vary by lender, so confirm this directly with your current and prospective lenders or a mortgage broker before assuming either way.
Managing payment shock
If your new payment is going to be noticeably higher, you have a few levers besides just absorbing it.
- Extend your amortization: spreading the balance over more years lowers the monthly payment, though you'll pay more interest over the life of the loan. This is worth doing deliberately, not by default.
- Make a lump-sum prepayment before renewal: paying down principal with savings, a bonus, or your annual prepayment privilege reduces the balance the new rate applies to.
- Stress-test your own budget: before you sign anything, run your household numbers at the new payment for a few months to see where the slack has to come from.
- Build a cash buffer: even a modest TFSA or high-interest savings cushion set aside in the months before renewal takes pressure off the transition.
If a higher payment would genuinely strain your budget, talk to your lender well before maturity — most have options for borrowers under financial pressure, and it's far easier to arrange support proactively than after a missed payment.
Your renewal timeline and checklist
Lenders are required to send a renewal statement, but you shouldn't wait for it to start planning. Begin shopping 120 days (about four months) before your maturity date — that's typically when competing lenders' rate holds become available and gives you time to compare without rushing.
- Pull your current mortgage statement and note your balance, remaining amortization, and maturity date.
- Get at least one competing quote, ideally through a mortgage broker who can shop multiple lenders at once.
- Ask your current lender to match or beat that offer before you commit to switching.
- Confirm any switch costs (appraisal, legal, discharge fees) against the rate savings to see if moving lenders actually nets out ahead.
- Decide on term length deliberately — a shorter term bets on rates falling before your next renewal, a longer term locks in certainty.
Frequently asked
Do I have to pass the mortgage stress test to renew?
If you renew with your current lender without increasing your loan amount, you typically don't need to requalify. Switching to a new lender can work differently depending on the lender's own policies, so confirm directly with the lender or a mortgage broker before assuming either way.
What happens if I miss my renewal date and do nothing?
Most lenders will automatically roll you into a new term, often at a posted rate that isn't their most competitive offer. It's not a default, but it usually costs you more than negotiating or shopping around would have.
Is it worth paying a penalty to break my mortgage early instead of waiting to renew?
It depends entirely on your penalty amount versus the rate savings over your remaining term — this is a math problem specific to your mortgage, so run the numbers (or ask your lender for a payout quote) before assuming either option is better.
Sources
General information for Canadian readers, not individualized financial, tax or investment advice. Figures reflect the date reviewed; confirm current limits and rules with the CRA or a qualified professional before acting.