Should You Renew or Refinance Your Mortgage This Fall?

Roughly 1.2 million Canadian mortgages are coming up for renewal this year, and a large share were locked in back in 2020 and 2021, when 5-year fixed rates sat between 1.5 and 2.5 percent. If your renewal notice is landing this fall, the rate you're offered probably looks nothing like the one you signed years ago, and that's exactly the moment to figure out whether a simple renewal or a full refinance actually makes more sense for you.

This is general information, not mortgage or financial advice. Every situation is different, so it's worth running your specific numbers by a licensed mortgage broker before making a decision.

Renewal vs. Refinance: What's the Actual Difference

These two terms get used interchangeably, but they're not the same thing, and the difference matters.

The Stress Test Rule Worth Knowing

This trips people up more than almost anything else in the process. As of OSFI's 2025 guidance, if you renew with your current lender and don't increase your loan amount or amortization, you don't need to requalify under the stress test at all. The same is now true if you do a straight switch to a new lender at renewal, as long as you're not increasing what you owe.

Refinancing is different. Because it's treated as a new mortgage application, you'll need to qualify at the higher of 5.25 percent or your contract rate plus 2 percent, regardless of which lender you use. It's also worth knowing that refinancing above 80 percent loan-to-value isn't permitted in Canada, so there's a hard ceiling on how much equity you can access this way.

When Renewal Makes More Sense

If your goal is simply to lock in a new rate on the balance you already have, renewal is usually the more straightforward path.

• You keep your current loan amount and amortization
• You avoid the stress test entirely if you stay put or do a straight switch
• Lenders typically let you lock in a renewal rate 4 to 6 months before your term ends, which is worth doing early to protect against rate increases, and in most cases you can still switch to a lower rate if one becomes available before your maturity date

When Refinancing Might Be Worth It

Refinancing makes more sense when you need to change more than just the rate.

• Debt consolidation. Rolling higher-interest credit card or loan balances into your mortgage can lower your overall monthly costs, though it's worth being honest about the spending habits that created the debt in the first place.
• Funding a renovation. If you're considering something like a garden suite or secondary suite, accessing equity through a refinance is one of the more common ways homeowners fund the build.
• Restructuring your amortization. Extending your amortization can lower your monthly payment, though it's worth modelling the total interest cost over the life of the loan before committing.

If you're mid-term and considering breaking your mortgage to refinance, get the exact prepayment penalty from your current lender in writing first. For fixed-rate mortgages, the interest rate differential calculation can run into five figures, and that cost needs to be weighed against whatever you'd save.

Common Mistakes Worth Avoiding

• Auto-renewing at the first rate your bank offers without shopping around
• Refinancing mid-term without calculating the penalty first
• Confusing a renewal with a refinance, and being caught off guard by a stress test you didn't expect
• Extending your amortization without checking what it actually costs you in lifetime interest
• Forgetting that switching costs are often covered by the new lender, so comparing rates is usually worth the effort

Not Sure Where You Stand?

If part of your decision hinges on how much equity you actually have to work with, our free home evaluation gives you a real, current number for your home, which is often the missing piece when deciding between renewing and refinancing.

Contact us any time if you'd like a referral to a mortgage broker we trust, or book a call directly with our team to talk through your options.