Mortgage Renewal in Canada

During the pandemic, the Bank of Canada dropped its overnight rate to 0.25%, and five-year fixed mortgage rates fell to historic lows of 1.5–2.5%. Millions of Canadians locked in at those rates. Now those five-year terms are expiring, and homeowners are renewing into a completely different rate environment — with fixed rates around 3.8–4.8% in early 2026.

"Payment shock" is what happens when your monthly mortgage payment jumps significantly at renewal. For the average Canadian homeowner who locked in at 2% on a $500,000 mortgage with a 25-year amortization, renewing at 4.5% means a payment increase of roughly $320/month — or nearly $3,850 more per year.

Approximately 60% of all outstanding Canadian mortgages are set to renew in 2025–2026. This is not a crisis for everyone — many homeowners have built equity and can absorb the increase — but for those already stretched, the jump can be a serious financial strain. The good news: you have options, and the most important thing you can do is start preparing well before your renewal date.

Your lender will typically send a renewal notice 4–6 months before your term expires. This letter contains a renewal offer with a new interest rate and term options. It might look official and final — but it is absolutely a starting point for negotiation, not a take-it-or-leave-it deal.

• The renewal notice will include your current mortgage balance, remaining amortization, and one or more rate options (fixed and variable)
• The offered rate is almost never the lender's best rate — it's typically their posted rate or slightly below it
• You are not obligated to accept the offer or stay with your current lender
• You have the legal right to switch lenders at renewal without penalty (your term is ending, so there is no early break fee)
• If you do nothing, most lenders will auto-renew you into a new term at whatever rate they choose — often their posted rate, which is the worst rate available

Mortgage rates are negotiable in Canada. The posted rates you see on bank websites are almost never what informed borrowers actually pay. Here is a step-by-step approach to getting the best rate at renewal.

1. 1Start 4–6 months early. Give yourself time to shop, compare, and negotiate without pressure.
2. 2Get quotes from at least 3–4 lenders. Include your current bank, a credit union, a monoline lender (like MCAP or First National), and an online lender (like nesto or Canwise).
3. 3Use a mortgage broker. Brokers have access to dozens of lenders, including wholesale rates that are not available to the public. Their service is free to you — the lender pays their commission.
4. 4Check rate comparison sites like Ratehub.ca, nesto.ca, and Rates.ca to see current market rates. This is your baseline.
5. 5Call your current lender's retention department (not the regular customer service line). Say: "I've been shopping around and I have a quote for X%. Can you match or beat that?"
6. 6If your lender matches, great. If not, tell them you will be transferring your mortgage elsewhere. Many lenders have a second, better offer they only present when you say you are leaving.
7. 7Get everything in writing. Verbal rate promises mean nothing — get a rate hold commitment letter with the rate, term, and expiry date.

This is one of the biggest decisions at renewal: lock in a fixed rate for stability, or go variable and bet that rates will drop further? In 2026, the answer depends on your risk tolerance, your budget flexibility, and where the Bank of Canada is headed.

In early 2026, the Bank of Canada has been gradually lowering its overnight rate from the 2023–2024 peak, and most economists expect further cuts through the year. This makes variable rates potentially attractive — if the Bank continues cutting, your variable rate drops with it. However, fixed rates are also competitive because lenders have already priced in expected cuts.

A middle-ground strategy: choose a shorter fixed term (2–3 years) instead of the traditional 5-year term. This lets you renew again sooner when rates may be lower, without the payment uncertainty of a variable rate.

If payment shock is hitting your budget hard, one option is to extend your amortization period at renewal. For example, if you have 20 years remaining, you could extend back to 25 or even 30 years. This reduces your monthly payment by spreading it over more time.

Extending from 20 to 25 years on a $400,000 mortgage at 4.5% saves you about $330/month. That is meaningful breathing room. But over the full amortization, you pay significantly more in total interest because you are borrowing for longer.

Important: if your mortgage is insured (you put less than 20% down originally), the maximum amortization is typically 25 years. Uninsured mortgages (20%+ down payment) can usually extend to 30 years. Check with your lender about what options are available to you.

The months leading up to your renewal are a golden opportunity to reduce your principal and soften the impact of a higher rate. Every dollar you pay down before renewal is a dollar you will not pay higher interest on for the next 5 years.

1. 1Make a lump-sum payment. Most mortgages allow annual lump-sum payments of 10–20% of the original mortgage amount, directly against the principal. Even $5,000–10,000 reduces your balance and lowers your renewed payment.
2. 2Increase your payment frequency. Switch from monthly to accelerated bi-weekly payments. This effectively adds one extra monthly payment per year, reducing your principal faster.
3. 3Temporarily increase your payment amount. Many lenders allow you to increase regular payments by 10–20% per year. Bump it up now while your rate is still low — the extra goes straight to principal.
4. 4Use TFSA or non-registered savings strategically. If you have savings earning 3–4% in a TFSA savings account, consider whether those funds would save you more by reducing a mortgage that is about to cost you 4.5%+.
5. 5Avoid taking on new debt before renewal. Adding a car loan or increasing credit card balances right before renewal weakens your financial position and limits your options.

Many Canadians do not realize how easy it is to switch lenders at mortgage renewal. When your term is up, you are free to transfer your mortgage to any lender offering better terms — and the new lender typically covers most of the transfer costs to win your business.

• At renewal, there is no penalty to leave your current lender (your term has ended)
• The new lender usually covers legal and appraisal fees for a standard transfer ("switch")
• A straight transfer means you keep the same mortgage balance and amortization schedule — only the rate and lender change
• If you are switching without increasing the mortgage amount, you do NOT need to pass the stress test at most lenders (this changed in 2024 — the government removed the stress test requirement for uninsured mortgage switches)
• However, if you want to refinance (increase your mortgage amount or change terms significantly), the stress test applies

The process typically takes 2–4 weeks. Your new lender handles most of the paperwork, and a lawyer or notary facilitates the transfer. You sign a few documents, and on your renewal date, the new lender pays off your old mortgage and you start making payments to them.

Renewal and refinancing are not the same thing. A renewal simply continues your mortgage with new rate and term. Refinancing means taking out an entirely new mortgage — and it opens up options like accessing home equity, consolidating high-interest debt, or changing your mortgage structure.

Refinancing makes sense if you have high-interest debt (credit cards at 20%+) that you want to consolidate into your mortgage at 4–5%, if you need funds for a major renovation that will increase your home value, or if you want to restructure your mortgage terms. But be honest about the costs: legal fees, appraisal, possible CMHC insurance (if refinancing above 80% LTV), and the stress test hurdle.

6 Months Before Renewal

3–4 Months Before Renewal

When the Renewal Letter Arrives

If Switching Lenders

Official Government Resources