How to Renew Your Mortgage in Canada

Three years have passed since interest rates began rising in 2022. Although the Bank of Canada has started to lower its policy rate, many homeowners with five-year fixed mortgages are seeing much higher interest rates and larger payments when their loans come up for renewal. Even borrowers in variable-rate mortgages may face requests from their lenders to increase monthly or biweekly payments going forward.

If your mortgage is coming up for renewal in the next year—or if you’ve already received renewal terms—walking into the process informed will make a big difference. Understanding the types of terms you may be offered and the practical options available to you reduces the shock of higher payments and helps you choose the path that best protects your finances. In some cases, renewing early with your current lender can be a smart move; in others, shopping your renewal to find a more competitive lender is the better choice.

Calculating your mortgage renewal

Before you agree to new terms, use a mortgage renewal calculator to estimate the real impact on your monthly budget. A good calculator lets you adjust variables such as location, principal balance, mortgage term and amortization, plus payment frequency. It will show how different interest rates and terms change your payment amount and the total interest paid over time. If your lender has provided a proposed renewal package, run those numbers to see whether the offer is fair or whether another lender or product might be more suitable. Include related carrying costs such as property taxes, insurance and utilities to understand your overall housing expense after renewal.

Should you change your mortgage terms and conditions?

Deciding whether to alter the length or type of your mortgage term depends on your outlook, tolerance for rate fluctuations and personal priorities. If you expect rates to continue to fall and want flexibility, shortening the term—three years, two years or even shorter—lets you revisit your mortgage sooner and potentially capture lower rates. On the other hand, if you prefer rate certainty and want to avoid the stress of frequent renewals, locking into a longer fixed term can provide peace of mind, even if the rate is higher today.

Another option is to switch between fixed and variable-rate mortgages. Variable-rate loans often track market moves more closely and may offer lower initial rates, while fixed-rate loans provide predictable payments for the term. Keep in mind that some variable mortgages with fixed-payment structures include trigger provisions: if the lender’s posted rate rises above a threshold, your payment could increase even if your nominal rate is variable. Consider how much monthly payment volatility you can absorb before choosing a product.

How to cope with higher payments

Most homeowners renewing a mortgage taken out several years ago will face higher payments. There are practical steps you can take to manage that increase and protect your homeownership:

• Review prepayment options: If your mortgage allows prepayments without penalty, accelerate principal reduction when you have extra cash to lower long-term interest costs.
• Consider amortization changes: Extending amortization can lower payments now, though it increases interest paid over the life of the loan—use it as a temporary relief measure if needed.
• Adjust payment frequency: Switching from monthly to biweekly or accelerated payments can reduce interest over time and slightly lower your average balance.
• Reprioritize finances: Reassess discretionary spending, and consider consolidating higher-interest debts to create a more manageable overall payment profile.
• Tap emergency reserves cautiously: Using savings or investments to cover short-term gaps should be done thoughtfully—avoid depleting an emergency fund that protects against unexpected shocks.
• Shop for better offers: Compare renewal offers from other lenders; a different lender or mortgage product may offer terms that better match your circumstances.

Before making changes, run the numbers and, if needed, consult a mortgage professional who can explain trade-offs and identify options you may not have considered.

What if you hit a wall?

In some cases, a lender may decline to renew a mortgage—particularly after a period of missed payments or if the borrower’s financial picture has materially changed. A declined renewal is serious but not the final step. Before considering selling, explore options such as:

• Approaching other lenders or mortgage brokers who may be willing to offer a renewal or a refinance, sometimes with different terms or conditions.
• Negotiating with your current lender for a modified repayment plan or a temporary adjustment to payment amounts while you stabilize finances.
• Exploring government or community support programs in your area that provide short-term relief or counseling for homeowners facing hardship.

Act early: if you suspect a renewal may be difficult, begin outreach and document preparation well in advance of the renewal date to preserve as many options as possible.

Read more on mortgage finance:

• Why are mortgages so expensive in Canada?
• Second mortgages in Canada: What are the rules?
• New mortgage changes for 2024: Wider access to 30-year mortgages and more
• High borrowing costs and condo oversupply: market impacts