Mortgage Renewal vs Switching Lenders

The renewal letter is an offer, not an obligation

When your mortgage term ends, your current lender sends a renewal letter with a new rate and term options. Most borrowers sign it and send it back. It is the path of least resistance — no applications, no paperwork, no waiting.

It is also the single most common avoidable cost in a mortgage. The renewal offer is not a favour — it is a negotiating position. The lender knows that inertia is powerful and that most people will not shop around. The rate on that letter is rarely the best rate available to you.

Your three options at term end

When your term expires, the paths forward are distinct and worth understanding separately.

• Renew with your current lender — sign a new term at the offered (or negotiated) rate. Simplest process: no new application, no legal work, no appraisal.
• Switch to a new lender (same balance) — transfer your existing mortgage balance to a different lender at a better rate. You keep the same principal amount — this is not borrowing more.
• Refinance — change the mortgage amount itself, typically to access equity or consolidate debt. This is a new mortgage, not a transfer.

What a switch involves

A straight switch — same balance, new lender — does not usually require the new lender to underwrite the purchase itself. They are not re-approving the property in the same way as a new purchase. But they do need to qualify you as a borrower.

That means you pass the stress test again: qualifying at the greater of your contract rate plus 2% or the qualifying rate floor. If your income or debt situation has changed significantly since your original purchase, this matters.

The process takes more effort than signing a renewal letter, but far less than buying a new property. You provide income documentation, the new lender orders a title search, and the switch closes on your maturity date.

Costs on a switch

Switching is not free, but the costs are often lower than borrowers expect — and new lenders frequently cover some of them to win the business.

• Discharge fee — your current lender charges a fee to release the mortgage from title.
• Appraisal — the new lender may require one, though many waive it for switches under a certain loan-to-value threshold.
• Assignment / registration costs — transferring the charge on title to the new lender.

A refinance — because it involves changing the mortgage amount and registering a new charge — typically has additional legal costs that a straight switch may not. This is one reason to separate the "do I want a better rate" question from the "do I want to borrow more" question.

Timing: when to start shopping

Most lenders allow you to lock a rate hold roughly four months before your maturity date. A rate hold means the lender guarantees a quoted rate for a set period — if rates rise before your switch closes, you keep the lower locked rate. If rates fall, you typically get the lower one.

Starting the conversation four months out gives you time to compare, gather documents, and close without pressure. Waiting until the renewal letter arrives — often just weeks before maturity — leaves you deciding under a deadline.

Use the renewal calculator to compare what your current offer costs over the term against alternatives.

Breaking mid-term: a different calculation

Everything above applies at maturity — when your term ends and you owe no penalty. Breaking a mortgage before the term ends is a different situation with real costs.

• Variable rate — the penalty is usually three months of interest on your remaining balance.
• Fixed rate — the penalty is the greater of three months' interest or the interest rate differential (IRD). The IRD compares your contract rate against the lender's current rate for the remaining term and compensates them for the difference.

IRD penalties can be substantial — sometimes enough to erase the benefit of a lower rate entirely. Whether breaking early makes financial sense depends on the size of the penalty relative to the savings over the new term. This requires a specific calculation with your current lender's numbers.

What to have ready before you shop

Whether you end up switching or negotiating a better deal with your current lender, having these ready saves time:

• Your current mortgage statement (balance, rate, maturity date)
• The renewal letter if you have received one
• Recent income documentation (pay stubs, T4, or tax returns if self-employed)
• A current property tax statement
• Your property insurance declaration page

For more on how the renewal and refinance process works, see the renewals and refinancing page. For a comparison of rate types, see Variable vs Fixed Mortgage Rates.