Renewing Your Mortgage: 5 Mistakes That Cost Canadians Thousands

Roughly 60% of Canadian mortgage holders sign their lender’s renewal offer without negotiation, without comparison, without questioning the term, and without considering changes that could save them tens of thousands. Here are the five mistakes that cost the most.

Mistake 1: Signing the first renewal offer

Your bank sends a renewal letter 30-90 days before maturity with a “posted-rate-minus-something” offer. That offer is a starting bid, not a final answer. The bank assumes most clients will sign it.

Compare it against what you can get elsewhere. Even a 0.25% rate improvement on a $500,000 mortgage saves roughly $13,000 over a 5-year term. The conversation to get that 0.25% is usually a 10-minute phone call.

Mistake 2: Not switching when it’s clearly better

Until November 2024, switching lenders at renewal meant re-qualifying under the stress test — which trapped a lot of borrowers with their existing lender even when the rate was uncompetitive.

That’s no longer true. OSFI exempted uninsured straight switches from the stress test, meaning if you have 20%+ equity and you keep the same loan amount and amortization, you can move to a new federally regulated lender freely.

Switching is more paperwork than staying, but the rate difference is usually worth it. New-lender promotions often beat retention offers from your existing bank by 0.15-0.40%.

Mistake 3: Locking in a 5-year term out of habit

Five-year fixed is the most popular term in Canada. That doesn’t make it the right one for your situation. Considerations:

• Rates expected to fall? A shorter term (2-3 years) lets you re-renew sooner at lower rates without prepayment penalties.
• Selling within 3 years? Definitely don’t lock 5-year fixed — the IRD penalty on a 5-year fixed broken in year 2 can run into the tens of thousands.
• Variable rate? Most variables have a small, fixed-formula prepayment penalty (3 months’ interest) regardless of how the IRD math would work out on a fixed.

Term length is often more impactful than rate. Pick the term that matches your real-world plans, not the default.

Mistake 4: Ignoring the chance to refinance at renewal

Renewal is the one moment where you can restructure with no prepayment penalty. People miss this window every five years.

Worth considering:

• Consolidating high-interest debt into the mortgage (refinance up to 80% LTV)
• Funding a renovation at mortgage rates instead of HELOC rates
• Pulling equity for an investment property down payment
• Re-amortizing to free up monthly cash flow if life circumstances changed

Each of these technically counts as a refinance (and triggers the stress test, since it’s not a straight switch), but renewal is the cheapest moment to do them because you avoid prepayment penalties.

Mistake 5: Not starting early

Most renewal mistakes come from time pressure. Bank sends the letter 30 days out, you ignore it for 25 days, then you’re scrambling and sign whatever’s in front of you.

Start 120 days before maturity. That’s long enough to:

• Get rate quotes from multiple lenders
• Lock in a rate hold (most rate holds are 90-120 days)
• Order an appraisal if needed for a switch
• Negotiate your existing lender’s offer with leverage

If your bank’s offer is the best one, fine — sign it knowing it’s actually the best. If it isn’t, you have time to switch cleanly.

What I do for renewal clients

Anyone with a mortgage renewing in the next 6 months can send me their current details and I’ll run an independent comparison — what your bank is likely to offer vs. what’s actually best in the broader market. There’s no fee, and you’re under no obligation to switch.

Most clients save somewhere between $5,000 and $25,000 over their next term from a 20-minute conversation that wasn’t happening otherwise. Send me your maturity date and we’ll go from there.

Source: OSFI: Stress test exemption for uninsured switches (Nov 2024).