Why the renewal letter is rarely the best rate
Renewal is the moment your lender has the most leverage and you have the least attention. Many borrowers sign whatever arrives in the mail, and lenders know it. The rate in a renewal letter is often higher than what the same lender offers new customers, because a borrower who signs without shopping is profitable.
Federally regulated banks must send you a renewal statement at least 21 days before your term ends, and many send one several months earlier. Use that time. You can usually lock in a rate with a new lender up to 120 days before maturity, and if rates drop before you close, a good broker or lender will often honour the lower one.
Worked example: a 0.60-point gap
You owe $400,000 with 20 years left. Your lender offers 4.99% for five years. A competing lender offers 4.39%.
- Payment at 4.99%: $2,626.34 a month
- Payment at 4.39%: $2,498.41 a month, about $128 less
- Interest over five years: $91,036 vs. $79,784, a saving of $11,251
- You also finish the term owing about $3,600 less, even with the lower payment
That's eleven thousand dollars for a few phone calls. Even a quarter-point improvement on a balance this size is worth around $4,700 over a five-year term.
How the calculator works
For each rate, the calculator converts the quoted annual rate into an effective monthly rate using semi-annual compounding, the way Canadian fixed-rate mortgages are required to be quoted. It then calculates the payment that pays off your balance over the remaining amortization and runs the loan month by month through your new term. The "interest you keep" figure is the difference in total interest paid during the term.
It assumes you keep the same amortization either way. If you're switching lenders, that's also a condition of skipping the stress test, as explained below.
Switching lenders at renewal: the stress-test rule changed
Until late 2024, switching an uninsured mortgage to a new lender at renewal meant re-qualifying at the stress-test rate. Borrowers whose incomes hadn't kept up with rates were stuck with whatever their current lender offered, and lenders priced renewals accordingly.
That's no longer the case for a straight switch. Since November 21, 2024, OSFI no longer expects federally regulated lenders to apply the minimum qualifying rate when you move an uninsured mortgage to a new lender at renewal, as long as you keep the same loan amount and amortization. The federal government extended the same treatment to insured mortgages. You still have to qualify with the new lender at your contract rate, and they'll still check your income, credit and property.
If you want to borrow more, extend your amortization, or add a co-borrower, it's no longer a straight switch and the full stress test applies. Our stress test guide explains the qualifying rate.
Decoder ring: the retention desk
The person who answers the general mortgage line usually can't move your rate much. Ask for the retention or renewals department, tell them you have a written offer from another lender, and ask them to match or beat it. Have the competing rate, term and lender name ready.
What switching actually costs
Switching at maturity carries no prepayment penalty, because your term has ended. The costs are smaller:
- Discharge or transfer fee charged by your current lender, typically a few hundred dollars. Provincial rules on these fees vary.
- Appraisal, which the new lender often pays for or waives.
- Legal fees to register the new mortgage, which many lenders cover on a straight switch.
Ask every lender for their switch program in writing: what they cover, and whether there's a cash-back or fee rebate. Subtract anything left over from the interest saving above. On most balances, a meaningful rate gap still wins easily.
Your renewal checklist
- Find your maturity date and set a reminder six months before it.
- At four months out, get at least two competing written offers: one from a mortgage broker and one from another lender directly.
- Call your lender's retention desk with the best offer in hand.
- Compare the offers here, then compare the fine print: prepayment privileges, penalty method, portability.
- Sign, or switch, before your maturity date so you don't roll into an automatic renewal.
The full negotiation script is in our guide, how to negotiate your mortgage renewal, and the B-3 renewal comparison sheet lets you lay three offers side by side on paper.