Your first mortgage renewal: renew, switch, or refinance?

Mortgages · 8 min read

Most first-time buyers treat the mortgage as a one-time decision made at purchase. But a mortgage is really a series of terms — anywhere from a few months to five years or longer each — and at the end of every term it must be renewed, moved, or paid off in full. The first renewal is when most buyers discover that the lender's letter is an opening offer rather than a verdict, that switching lenders does not necessarily mean facing the stress test again, and that doing nothing has its own cost. This guide maps the three paths at maturity, the qualification rules for each, and a dated procedure for working through it.

What renewal is, and the 21-day statement

When a term ends, the borrower must either pay the balance in full or renew the mortgage — most borrowers will need multiple terms to repay a mortgage in full. If the lender is a federally regulated institution, such as a bank, it must provide a renewal statement at least 21 days before the end of the existing term — and, separately, it must notify the borrower 21 days ahead if it does not intend to renew the mortgage at all. The statement is required to show the balance or remaining principal at the renewal date, the interest rate, the payment frequency, the term, and any charges or fees that apply. One protection is built into that offer: the interest rate in the statement cannot increase between the statement and the renewal date.

The 21-day statement is a legal minimum, not a shopping window — the Financial Consumer Agency of Canada (FCAC) advises borrowers to start shopping a few months before the end of the term, and explicitly warns against waiting for the renewal letter to arrive before comparing options. The renewal letter tends to arrive when the lender's rate is set; the months before it are when competing offers can still be used to negotiate.

Three paths at maturity: renew, straight switch, refinance

At the end of a term, there are really three distinct moves, and they differ in what the borrower asks a lender to do. Treating them as one "renewal" decision is the most common source of confusion, because the qualification rules — especially the stress test — attach to the move, not to the date.

Two boundaries in that table are worth reading twice. First, a straight switch has a precise definition: the same loan amount and the same remaining amortization, moved to a new lender with no equity taken out — and only a small addition, up to about $3,000 to cover switching costs, preserves that treatment. The moment the balance rises, the amortization extends, or cash comes out, the move is a refinance and the stress test applies. Second, "no stress test" does not mean "no underwriting": the new lender still verifies income, credit and payment history under its own standards. The November 2024 change removed one specific hurdle — the prescribed qualifying rate — not the lender's judgment.

The stress test on a switch, path by path

The stress test is the qualifying safeguard that requires lenders to assess whether a borrower could carry a mortgage at a higher rate than the contract rate. At renewal, it applies — or doesn't — exactly as the scenario table shows:

• Stay with the current lender, change nothing: the prescribed stress test is not re-applied. The lender simply offers the rate and terms.
• Straight switch, uninsured mortgage, to another federally regulated lender: since November 21, 2024, the prescribed qualifying rate is not applied — provided the balance and the remaining amortization do not increase.
• Straight switch, insured mortgage: no re-qualification at the test rate either; the Department of Finance confirmed this treatment in 2023.
• Switch while borrowing more or adding years: this is a refinance, and the stress test applies.
• Refinance or add a line of credit at renewal: treated as a new mortgage — the test applies.

The practical effect of the 2024 change is competition: an uninsured borrower who might once have failed the test at a new lender — and been stuck accepting the current lender's offer — can now move the same mortgage at the contract rate instead of a stress-tested one. Not every switch succeeds: a material drop in income or new debts can still end an application, and individual lenders may qualify more conservatively than the official minimum. But the test alone is no longer a reason to skip shopping.

The renewal procedure: start months before the letter

FCAC's guidance amounts to a procedure: start a few months before maturity, compare lenders and brokers, negotiate with the current lender using documented competing offers, and read the renewal statement as the last step rather than the first. With a typical maturity date M, a first-time buyer can run it as follows:

1. Four to five months before M: review the file. Confirm the balance, remaining amortization, payment frequency, prepayment privileges, and whether the mortgage is registered as a standard charge or a collateral charge. A collateral charge needs extra lead time: moving it means discharging and re-registering the charge, repaying or transferring every loan secured by it (including lines of credit and car loans), and paying the associated fees. Ask the lender, lawyer or notary which charge applies.
2. About four months before M: get competing offers. Contact other lenders and mortgage brokers for straight-switch offers on the same balance and amortization, and ask each what switching costs they will cover — new lenders frequently pay appraisal and assignment costs. Collect offers in writing; the current lender can only match what it can see.
3. At least one month before M: negotiate. Tell the current lender about the competing offers and ask for a discounted rate against the rate quoted in the renewal letter — FCAC notes that a lower-than-quoted rate is often available. Provide proof of the competing offers.
4. When the renewal statement arrives (at least 21 days before M): read it as a checklist. Confirm the balance at the renewal date, the rate, the payment frequency, the term, and every charge or fee — and check whether it states the mortgage will renew automatically if nothing is done. Automatic renewal means accepting the quoted rate and terms without a comparison.
5. Choose a path, and sign before maturity. If the current lender wins, renew. If a competitor wins, complete the switch: approval, registration documents signed (a lawyer or notary meeting), and, for insured mortgages, the existing insurance certificate number handed to the new lender so the premium is not paid twice.

What success looks like: by the renewal date, the borrower can name the three cheapest viable offers — the current lender's best, one other federally regulated lender, and one broker or monoline — and the chosen offer beats the renewal letter on rate or terms. If no shopping happened before the statement arrived, that is the failure mode to avoid next time, not this time.

What to check in a renewal offer

Rate dominates the conversation, but FCAC's own checklist for the renewal moment is wider, and each item is a question to put to the offer on the table:

• Can payments rise? FCAC frames renewal as the time to ask whether the budget allows higher payments — higher payments repay the mortgage sooner and save interest. A renewal is also the moment an amortization can be revisited: shortening it raises the payment but accelerates payoff, while the reverse (extending) is a refinance-style change that can re-trigger qualification.
• Payment frequency and privileges: accelerated biweekly, lump-sum allowances, and payment-increase options carry into the next term — or they can be renegotiated. A buyer planning prepayments should confirm the privileges rather than assume they persist.
• Debt consolidation: rolling higher-interest debt into the mortgage at renewal is a refinance, not a renewal — with the stress test, the new underwriting, and the costs of both. FCAC lists it as a reason to reconsider the mortgage, but the borrower should price it as a new application.
• Insurance extras: mortgage-linked life, disability, critical illness or employment insurance attached to the original contract should be re-decided at renewal — whether it is still wanted, and whether the new lender's product differs.
• The insurance premium trap on switches: a new mortgage loan insurance premium can be charged when switching lenders if the loan amount increases or the amortization extends — the two moves that also end straight-switch treatment. For a true straight switch with existing insurance, passing the old insurance certificate number to the new lender avoids paying the premium twice.

One final FCAC warning: if no action is taken, the renewal may be automatic, and the statement will say so. Automatic renewal means the mortgage continues at the lender's offered rate and terms — negotiated by nobody, compared against nothing. The procedure above exists to make that outcome a choice, not a default.

FAQ

How early will I hear from my lender? For a federally regulated lender, the renewal statement must arrive at least 21 days before the end of the term, and the offered rate cannot rise before the renewal date. But shopping should start months earlier — the letter is the finish of the comparison, not the start.

Do I have to pass the stress test to switch lenders at renewal? Not for a straight switch — same balance, same amortization, no new money — since OSFI's November 21, 2024 change, at a federally regulated lender. The new lender still underwrites the application on its own standards. Increasing the balance or amortization makes it a refinance, and the test applies.

What does switching cost? Expect discharge, registration, transfer or assignment fees, possibly an appraisal, and other administration fees — with extra costs if the mortgage is a collateral charge. Many new lenders pay some or all of these; ask directly rather than assuming.

Can I change my amortization at renewal? Payment amounts can generally be adjusted, but extending the amortization changes the nature of the transaction — it can re-trigger qualification testing and a new insurance premium assessment. Treat it as a decision, not a setting.

Will my insurance premium be charged again if I switch? A true straight switch with existing insurance should not attract a new premium — give the new lender the existing insurance certificate number. A new premium can be charged if the loan amount increases or the amortization period is extended.

General information only, not financial or mortgage advice. Renewal, stress test, and insurance rules come from the Financial Consumer Agency of Canada, OSFI, and the Department of Finance, and can change — confirm current requirements with a lender or a licensed mortgage broker before acting.