Renewing Your Mortgage in Canada: The Complete Playbook

Meta description: Your mortgage is renewing and your bank hopes you sign fast. This playbook covers rate holds, shopping the Big 5, IRD penalties, and negotiation scripts that save real dollars.

Your mortgage renewal is the biggest financial negotiation most Canadians go through. The banks know this. They also know most people sign the first offer, which is exactly why the first offer is rarely the best one. Here is the playbook, start to finish.

Step 1: Start 120 days out

Your current lender can typically hold a renewal rate for about 120 days before your maturity date, and outside lenders offer rate holds of a similar length. This is the single most important move in the playbook: lock in a ceiling early, and if rates fall before you close, you still get the lower rate.

Practical timeline for a renewal on, say, June 1:

• February 1 (120 days out): Get your rate hold from your current lender and at least two other lenders. Sign nothing yet.
• March to April: Shop and negotiate. Let lenders compete in writing.
• Mid May: Make your decision, sign the paperwork, and give your lender the discharge and transfer instructions if you are switching.

Note: if your current lender sends you a renewal package 30 days before maturity, that is late by design. You should already have a held rate by then.

Step 2: Understand what you are shopping

At renewal you are buying three things: rate, term, and features.

Rate. The number everyone quotes. On a $400,000 mortgage with 20 years left, 0.25% is about $48 a month, or roughly $580 a year. Over a 5-year term, that is close to $2,900 in pure interest savings. Compare offers in dollars over the term, not basis points.

Term. The 5-year fixed is the Canadian default and the benchmark everything is compared against. But a 3-year fixed can make sense if rates are falling and you want to renew into a lower market sooner. Run the dollars both ways.

Prepayment privileges. The standard Big 5 offer is 15% to 20% of the original balance per year as lump sums, plus doubled-up payments, without penalty. If you drop a bonus or tax refund on the mortgage, the size of that privilege is worth real money: on $400,000, a 15% privilege lets you throw $60,000 a year at the principal penalty-free.

Step 3: Get competing quotes in writing

Call or apply with at least three lenders: your current one, one other Big 5 bank, and one monoline or non-bank lender (they live and die on rate and often beat the banks by 0.10% to 0.20%). You want commitments in writing, not verbal "we could probably do" numbers.

Then do the uncomfortable part: take the best quote back to your current lender and ask them to match it. They very often can. The first renewal offer they mail you is priced for people who do not shop. The retention desk has different numbers.

A script that works: "I have 4.29% in writing from another lender for a 5-year fixed. I would prefer to stay, but not at 4.54%. Can you match this?" Short, factual, with a number. No bluffing needed if you actually have the quote.

Step 4: Know your break penalty before you switch early

If your current mortgage matures after your shopping window, or you are thinking of breaking mid-term to lock something better, you need the penalty math. In Canada, penalties work two ways:

3 months' interest. This is how variable-rate mortgages are always penalized. On a $400,000 mortgage at 5%, that is roughly $5,000.

IRD (interest rate differential). This is the fixed-rate penalty, and it is usually the bigger one. Roughly: your lender compares your contract rate to the rate they could lend your remaining balance out at today, multiplies the difference by your remaining months. When rates have fallen a lot since you signed, IRD penalties get large, sometimes $10,000 to $20,000 on a mid-size mortgage.

Banks calculate IRD in their own favour, comparing against their posted rate minus your discount, not the best rate available today. Always get the actual penalty number from your lender first. A switch only pays if the interest savings exceed the penalty plus fees.

Step 5: Porting when you move instead

If you are selling and buying at the same time as your renewal window, ask about porting: moving your existing mortgage, rate and all, to the new property. If your current rate is below market, porting preserves it. You usually have to close the sale and purchase close together, often within 30 to 90 days, and if the new mortgage is bigger you blend the old rate with a new rate on the top-up amount. When your rate is above market, skip the port and just break and shop.

Step 6: Watch the fees on a switch

Switching lenders at renewal is cheap but not free. A transfer or assignment fee (around $300 to $400), discharge fees, and possibly appraisal or legal fees add up. Many lenders run switch specials that cover or rebate these costs, and there is no reason to pay them if a competitor will. Compare the total all-in cost of each offer, not just the rate.

Step 7: Decide on variable vs. fixed with dollars

At renewal you choose the rate type again. Skip the philosophy and run the math:

• What is the best 5-year fixed you can get in writing?
• What is the best 5-year variable (usually prime minus a discount)?
• The difference between the two is the "insurance premium" you pay for certainty.

Right now, variable discounts of prime minus 0.60% to prime minus 1.00% are common, which puts a 5-year variable around 3.6% to 4.0% against 5-year fixed offers in the low-to-mid 4s. If the fixed rate is 0.50% above variable, you are paying about $115 a month on a $400,000 mortgage for the certainty. Decide if that is worth it to you. There is no universally right answer, just your budget and your sleep.

The common traps

• Signing the first renewal offer. The mailed offer is a starting point, not a price. Always push back.
• Renewing early without checking the penalty. Some lenders let you renew early into a new term with no penalty within the last 120 to 180 days. Before that window, the IRD math applies.
• Ignoring the amortization. Renewal is also a chance to reset your payment: extending the amortization lowers the payment (at the cost of more interest over time), shortening it builds equity faster. Do the math in dollars either way.
• Forgetting prepayments. If you made lump sums last term, confirm the new mortgage's prepayment privileges before signing.

Bottom line

Start shopping 120 days before renewal, get three quotes in writing, and make your current lender match the best one. Run the IRD math before breaking early, total up switch fees, and compare variable and fixed in monthly dollars, not theory. The borrower who shops almost always beats the borrower who signs the mail-in offer.

Ready to see where your renewal offer actually stands? Check your renewal offer on fiveyear.ca and see how it compares to the average rates other Canadians are reporting.