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Renewing your mortgage can save you money and improve your financial situation – if you avoid common mistakes. Many Canadians accept their lender’s first offer without exploring better options, missing out on savings. With rising interest rates, your payments could increase significantly, so it’s critical to approach renewal strategically. Here’s what to watch for:

• Don’t accept the first offer: Your current lender may not offer the best rate. New clients often get better deals. Compare rates from other lenders.
• Shop around: Use mortgage brokers or online tools like Ratehub.ca to compare offers and find better terms.
• Understand hidden fees: Discharge fees, legal costs, and prepayment penalties can add up. Calculate these costs before switching lenders.
• Review your finances: Adjust terms to reflect changes in income, debt, or goals. Options include shorter amortization periods or bi-weekly payments.
• Stay informed: New rules, like stress test exemptions for straightforward renewals, make it easier to switch lenders without added barriers.

With 1.2 million Canadian mortgages renewing in 2025, start planning 3–6 months in advance. Compare offers, check for hidden costs, and negotiate for better terms to avoid paying more than necessary.

3 Mortgage Renewal Mistakes That Cost Canadians Thousands

Mistake 1: Taking Your Lender’s First Offer

When your mortgage renewal notice arrives, it might seem easiest to sign the renewal offer and stick with your current lender. After all, they’ve been managing your mortgage for years, and switching might feel like a hassle you don’t want to deal with. But this convenience could end up costing you more over the long term.

Why Staying Loyal Can Cost You

Unfortunately, lenders don’t typically reward loyalty with better rates. In fact, they often save their most competitive offers for new clients. As Penelope Graham, a Mortgage Expert at Ratehub.ca, puts it:

“Lenders often offer more attractive rates to new clients” ^[1].

Here’s why: lenders know that loyal customers are less likely to shop around. If you’re comfortable with your current lender and have automatic payments set up, they can afford to offer you less competitive rates. On the flip side, they need enticing offers to attract new clients actively comparing options. This means new customers often get better deals than long-term ones.

Many homeowners stick with their lender out of convenience, even if it means paying more. True North Mortgage highlights this common mindset:

“Many homeowners believe that switching lenders at renewal is too stressful and costly. So they end up paying more to renew with their bank because they don’t want the hassle” ^[2].

While switching lenders does require some paperwork, it’s often less daunting than people assume. By not exploring other options, homeowners risk locking in higher rates and missing out on potential savings.

The Role of Mortgage Brokers and Online Tools

To avoid overpaying, consider using mortgage brokers and online tools to compare your options. These resources can simplify the process by presenting multiple offers side-by-side, saving you the trouble of reaching out to each lender individually.

Platforms like Ratehub.ca and Rates.ca make it easy to compare rates and terms from various lenders. They show details like monthly payments, fees, and other costs ^[3][4][5][6]. Even better, they calculate the Annual Percentage Rate (APR), which includes all fees in a single rate, helping you see the full cost of each option ^[3][5].

Instead of spending weeks calling banks and credit unions, these tools let you input your financial details and instantly view tailored results. Whether you’re considering switching lenders or negotiating with your current one, these platforms can uncover savings quickly and efficiently ^[4][6].

Mistake 2: Not Comparing Rates from Multiple Lenders

Many Canadians assume their lender offers competitive rates, but this assumption can be costly. Without exploring options from various financial institutions, you could miss out on savings that lower your monthly payments and reduce your overall mortgage costs.

Canada’s lending landscape is diverse, including banks, credit unions, online platforms, and alternative providers. While sticking with your current bank might seem convenient, a credit union in your province could offer lower rates, or an alternative lender might provide terms that better align with your financial goals. Taking the time to compare multiple offers can uncover savings you didn’t know existed.

Why Comparing Offers Pays Off

Shopping around for mortgage rates can lead to substantial savings over the life of your mortgage. Even a small difference in interest rates can add up. For instance, a 0.25% reduction in your interest rate could save you roughly $500 annually, or $2,500 over a typical five-year term.

But it’s not just about the interest rate. Comparing offers also highlights differences in terms and repayment options. Some lenders might allow larger prepayments or offer flexible payment schedules, which can help you pay off your mortgage faster or provide relief during financial challenges. These features are worth considering, especially if your financial situation or goals have shifted.

If your financial profile has improved since you first got your mortgage – perhaps through a better credit score, higher income, or lower debt – alternative lenders may offer better terms. Having competitive offers in hand also gives you leverage to negotiate with your current lender. Many lenders are eager to retain reliable customers and may match or even beat competitors’ rates to keep your business.

New Rules Make Switching Lenders Simpler

Beyond the potential savings, recent regulatory changes have made switching lenders easier for Canadian homeowners. One key update involves stress test exemptions for straightforward renewals. Previously, borrowers switching to a new lender had to pass a stress test, proving they could handle payments at a higher interest rate. Now, if you’re simply renewing without increasing your mortgage amount or extending the amortization period, you might not need to undergo the stress test again.

This change has opened doors for homeowners who previously felt stuck with their lender because they couldn’t pass the stress test elsewhere, despite a solid payment history. For straightforward renewals, this exemption removes a significant barrier.

Improved portability rules also simplify the process. Lenders must now provide clearer details on discharge fees and the steps involved in switching. Some institutions have streamlined their renewal applications, cutting down on paperwork and processing times.

Additionally, enhanced disclosure rules require lenders to clearly outline all terms and fees. This transparency makes it easier to compare the costs of staying with your current lender versus switching. With all the information upfront, you can make better-informed decisions.

These changes have also pushed lenders to step up their game. Many now have retention departments focused on offering better rates and terms to keep customers from switching. This increased competition works in your favour, giving you more opportunities to secure better deals and improved service from your lender.

Mistake 3: Missing Hidden Fees and Penalties

When renewing your mortgage, it’s easy to focus solely on interest rates, but ignoring hidden fees can lead to unexpected costs. While securing a lower rate is important, these fees can quickly offset any savings you might gain. Often buried in dense paperwork or glossed over in conversations, these charges deserve your full attention to truly understand the cost of staying with your current lender versus switching to a new one.

Many homeowners find themselves blindsided by fees they didn’t anticipate or fully understand. Although lenders are required to disclose these costs, they’re often tucked away in fine print. To make an informed decision, it’s crucial to identify and evaluate all potential fees.

Common Fees to Watch For

• Discharge fees: Charged when you switch lenders to release your property’s lien, these typically range from $200 to $400.
• Legal fees: A lawyer or notary is necessary to handle the paperwork when switching lenders, costing between $500 and $1,500 depending on your location and situation. Some lenders may offer to cover these costs, but this is often balanced out by slightly higher rates or other terms.
• Appraisal fees: If your new lender requires a property valuation, expect to pay $300 to $500. This is more common if you’re changing mortgage terms or if it’s been a while since your last appraisal.
• Prepayment penalties: Breaking your current mortgage early to switch lenders can be expensive. Fixed-rate mortgages usually incur the greater of three months’ interest or the interest rate differential, while variable-rate mortgages typically involve a three-month interest penalty.
• Administrative and processing fees: These can vary but might include application or registration fees, ranging from $100 to $500.
• Title insurance: A new lender may require this coverage, which costs around $200 to $400. However, you might already have transferable coverage from your original mortgage.

Understanding these fees is key to calculating the true cost of switching lenders. Compare these expenses with potential savings to determine whether switching is worth it.

Cost Comparison: Staying vs. Switching Lenders

To decide whether to stay with your current lender or switch, you need to weigh both the immediate costs and the potential long-term savings. Here’s a breakdown of how the numbers stack up:

For example, if a new lender offers a rate 0.5% lower than your current lender, you could save $1,250 annually on a $250,000 mortgage. Even with $1,500 in switching costs, you’d break even in about 14 months and enjoy savings for the rest of your term.

On the other hand, if the rate difference is just 0.1%, saving you $250 annually, those same switching costs would take six years to recover. In this case, staying with your current lender might be the better choice.

Some lenders offer cash-back incentives or cover certain costs to make switching more appealing. For instance, they might provide $1,000 cash back or pay up to $1,500 in legal and discharge fees. While tempting, these offers often come with slightly higher rates, so it’s essential to calculate the total cost over the life of your mortgage.

Timing is another critical factor. If you’re within 120 days of your renewal date, you can often switch without incurring prepayment penalties. However, if you’re switching earlier to lock in a lower rate, the penalties could outweigh any potential savings.

The math becomes more compelling with larger mortgages or bigger rate differences. For example, on a $500,000 mortgage, a 0.25% rate reduction could save you $1,250 annually, making switching costs easier to justify. But for smaller mortgages, the savings might not be enough to offset the fees, especially if the rate difference is minimal.

To make the best decision, ask lenders for a detailed cost breakdown. Many will provide a side-by-side comparison of your current situation and their offer, including all fees and long-term savings projections. This transparency allows you to choose the option that best fits your financial goals.

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Mistake 4: Not Reviewing Your Current Financial Situation

A lot can change between the time you first sign your mortgage and when it’s up for renewal. Instead of simply renewing without a second thought, it’s worth taking the time to reassess your income, expenses, and financial goals. Doing so ensures your mortgage terms still align with your current situation and prevents you from sticking with outdated terms that no longer serve you well.

Renewing your mortgage isn’t just about securing a competitive interest rate – it’s also an opportunity to reshape your mortgage to better suit your needs. Whether your goal is to pay off your mortgage faster, tap into your home’s equity, or lower your monthly payments, reviewing your finances before renewing can help you make informed decisions that align with your priorities.

Adjusting Your Mortgage Features

Your mortgage terms don’t have to stay the same as when you first signed. Renewal time is the perfect moment to make adjustments like changing your payment frequency, accessing home equity, or modifying your amortization period to better fit your current lifestyle and financial goals.

For instance, switching from monthly to bi-weekly payments can lead to an extra payment each year, helping you pay down your mortgage faster and save on interest. If your home’s value has increased, refinancing could allow you to access equity for renovations, investments, or even consolidating high-interest debt.

You might also consider changing your amortization period. Shortening it could mean higher monthly payments but less interest paid over time, while extending it could ease your cash flow, albeit with increased long-term interest costs. Many lenders also offer prepayment options, such as making lump-sum payments or increasing regular payments without penalties, which can help you pay off your mortgage quicker if you come into extra funds like bonuses.

When choosing between a fixed or variable rate, think about your current financial stability and risk tolerance. A variable rate might appeal if you’re comfortable with potential fluctuations and the possibility of lower rates, while a fixed rate offers predictable payments for easier budgeting. Be sure to consider how stress test rules might affect your ability to make these changes.

Stress Test Rules and Their Impact

If you plan to make significant changes to your mortgage – such as increasing the amount, extending the amortization period, or switching between fixed and variable rates – you’ll need to meet stress test requirements. These rules ensure you qualify at a higher interest rate, either the Bank of Canada’s benchmark rate or your mortgage rate plus a margin (whichever is higher). This can impact how much you’re able to borrow or the feasibility of certain changes.

Switching lenders also typically requires you to re-qualify under the stress test, even for minor adjustments. This process often involves providing updated income documentation, which can be more challenging for self-employed borrowers or those with variable incomes, even if their financial situation has improved.

If you don’t meet the stress test for the changes you want, you can still renew with your current lender under the same terms and revisit adjustments later when your financial situation or the rules change. To improve your chances of qualifying, consider planning ahead – keep detailed financial records, reduce other debts, and, if you’re self-employed, consult with an accountant to ensure your finances are in order.

While stress test rules might limit some options, they also provide a safeguard, ensuring you don’t take on more than you can handle. Taking the time to review your financial situation, including how these rules may apply, is essential for avoiding costly mistakes during your mortgage renewal process.

Mistake 5: Ignoring New Rules and Market Changes

The mortgage landscape in Canada is constantly shifting, shaped by new regulations, policies, and market trends. Sticking to outdated information when renewing your mortgage could mean missing out on better terms or opportunities. Keeping up with the latest changes is key to making informed and beneficial renewal choices. These updates often pave the way for more competitive and transparent options.

Recent Regulatory Updates

Several recent changes have reshaped the mortgage renewal process in Canada. For instance, many lenders have simplified their mortgage portability rules, making it easier to transfer your existing rate and terms if you decide to move. Open banking has also made strides, allowing for smoother sharing of financial data. This, combined with lenders becoming more accommodating toward non-traditional income sources, can create new possibilities – especially if your financial circumstances have shifted since your last renewal.

Keeping Track of Interest Rate Changes

Interest rate fluctuations remain a critical element in any mortgage renewal strategy. Keeping an eye on decisions by the Bank of Canada, along with factors like inflation and employment trends, can help you time your renewal to secure a better rate. Additionally, seasonal promotions and heightened competition among lenders may provide opportunities to lock in more favourable terms. Staying informed ensures you’re ready to act when the timing is right.

Conclusion: How to Avoid These Mortgage Renewal Mistakes

Renewing your mortgage is a prime opportunity to save money and adjust your terms to fit your current financial goals. With 1.2 million Canadian mortgages set to renew in 2025^[8], the right strategy could help you save thousands and secure better terms.

Start by shopping around. Don’t just accept the first renewal offer from your current lender – compare rates and features from multiple lenders instead^[7][8]. At the same time, take a close look at your financial situation. Has your income changed? Are your debt levels different? What are your future plans? These factors play a critical role in finding a mortgage that suits your needs. For example, switching to accelerated bi-weekly payments could shave three years off your mortgage and save you thousands in interest^[7]. You might also explore options like shorter or longer amortization periods, or even tapping into your home equity for renovations or debt consolidation.

Keeping an eye on market trends is just as important. With 60% of mortgage holders renewing in 2025 and 2026 expected to face higher payments – up to 15–20% more for fixed-rate holders^[9] – understanding the market can give you the upper hand when negotiating.

Don’t overlook hidden costs either. Fees like discharge penalties or prepayment charges can eat into your savings. Always request a full breakdown of all costs involved and weigh the total expense of staying with your current lender versus switching to a new one^[7].

To avoid last-minute stress, start the renewal process 3–6 months before your term ends. This gives you enough time to explore your options thoroughly. Using online tools or consulting a mortgage broker can also help you uncover competitive offers. And if you’re unsure about any part of the process, don’t hesitate to seek professional advice – especially since 27% of Canadians admit to having limited knowledge about mortgage affordability^[8].

The mortgage market is always changing, but by staying informed, proactive, and open to exploring alternatives, you can secure terms that work best for your financial situation.

FAQs

How can I prepare for my mortgage renewal to get the best deal?

To secure the best deal on your mortgage renewal, it’s important to start planning 3 to 6 months before your current term ends. Use this time to shop around and compare rates and terms from different lenders. This way, you can avoid paying more than necessary. If your current lender’s offer doesn’t quite measure up, don’t shy away from negotiating – or even switching to another provider if they have a better deal.

It’s also a good opportunity to revisit your financial goals and budget. Think about what you want from your next mortgage term. Are you aiming to pay off your mortgage faster, or would lower monthly payments suit you better? Be sure to look out for any hidden fees or penalties that could impact your decision.

By preparing in advance and exploring all your options, you’ll be in a better position to avoid costly mistakes and find a renewal that fits your financial needs.

How do I know if switching mortgage lenders will save me money despite the fees?

To figure out if switching lenders makes financial sense, start by adding up all the costs involved. These can include mortgage discharge fees (which might reach up to $400), prepayment penalties (usually three months’ interest or the interest rate differential), and any legal or administrative fees. Once you have a clear total, compare it against the potential savings you’d gain from a lower interest rate or improved mortgage terms.

If the savings outweigh the costs, making the switch could be a smart move. On the other hand, if the fees are higher than the savings, sticking with your current lender might be the better option. Be sure to carefully review your mortgage agreement and consider consulting a mortgage professional to make a well-informed choice.

What recent changes to Canadian mortgage rules could impact my renewal options?

Recent changes to Canadian mortgage rules could impact the terms of your renewal. The Canadian Mortgage Charter has introduced stronger protections for borrowers, requiring lenders to present clearer and more transparent options during the renewal process. Starting in September 2024, the federal government has also increased the cap on default-insured mortgages from $1,000,000 to $1,500,000, potentially making it easier to secure financing for higher-priced properties. Additionally, 30-year amortizations for insured mortgages were introduced in Budget 2024, which could influence your payment schedule.

These updates are designed to provide more clarity and flexibility for borrowers, but they might also lead to changes in your payment amounts or renewal terms. To get a clearer picture of how these adjustments might affect you, consider discussing them with your lender or a mortgage advisor.

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