When your mortgage term ends, or when you need to change your mortgage during the term, you either renew or refinance. A renewal carries your existing balance into a new term. A refinance replaces the mortgage with a new one, usually to borrow more or change its structure. This page compares the two; the mortgage renewal hub has the guides to each step of renewing.
Renewal vs refinance: key differences
| Feature | Renewal | Refinance |
|---|---|---|
| What it is | A new term on the balance you owe when the current term ends | A new mortgage that replaces the current one |
| When it happens | At maturity (end of term) | Any time, but a penalty usually applies mid-term |
| Cost | Usually none if you stay; a switch to another lender has small costs that new lenders often cover | Legal and appraisal fees, plus a prepayment penalty if done mid-term |
| Effort | Low: a renewal can be as simple as signing an agreement | Higher: full application, appraisal and legal work |
| Can you change lender? | Yes, with no prepayment penalty at maturity | Yes, but a penalty applies mid-term |
| Can you change the mortgage amount? | No (the balance carries forward) | Yes (borrow more or pay down) |
| Can you access equity? | No | Yes, within the lender’s loan-to-value limit |
| Can you consolidate debt? | No | Yes |
| Can you change the amortization? | Some lenders allow it | Yes |
| Stress test? | Not for a renewal with your lender or a straight switch | Yes |
How mortgage renewal works
Your mortgage term (most commonly five years) is not the same as your amortization (most commonly 25 years); term vs amortization explains the difference. When the term expires you renew: you sign a new term for the remaining amortization at a new rate and keep paying.
Your lender tells you its renewal offer ahead of time. If your mortgage is with a federally regulated lender, such as a bank, the lender must send you a renewal statement at least 21 days before your term ends, or tell you by then that it won't renew; the statement shows the balance, interest rate, payment frequency, term and any fees, and says the rate offered won't go up before the renewal date. That statement is an opening offer, and if you don’t respond your mortgage may renew automatically; the mortgage renewal guide covers the timeline (starting about four months before maturity), negotiating with your lender and what an automatic renewal means.
Why negotiating matters: on a $400,000 balance with 25 years of amortization left, the monthly payment at 5.00% is about $2,326 and at 4.75% about $2,270. A quarter-point lower rate cuts the payment by about $57 a month. That is the payment difference only; the lower rate also leaves a lower balance at the end of the term, so the interest saved over a five-year term is more than 60 times the payment difference.
Switching lenders at renewal
At maturity you can move your mortgage to another lender with no prepayment penalty, keeping the same balance and amortization. The new lender has to approve you, and you may pay a discharge fee and other costs unless it covers them. A straight switch can also skip the mortgage stress test. A refinance is stress-tested like a new mortgage: since November 21, 2024, OSFI exempts a stand-alone uninsured mortgage from the test only when it moves at renewal from one federally regulated lender to another with no increase in the remaining amortization and no increase in the loan amount beyond $3,000 for the costs of the move (a straight switch). Switching mortgage lenders covers the costs, the steps and when a switch pays.
When to refinance instead
Refinancing goes beyond a renewal. It replaces your mortgage, either during the term (breaking it) or at maturity, to change what you owe or how it is structured. It fits when you need to:
- Access home equity: borrow against your home’s value for renovations, investing or other large expenses, up to the lender’s loan-to-value limit
- Consolidate higher-interest debt: roll credit card or loan balances into the mortgage at a lower rate, which lowers the interest rate on that debt but spreads it over the mortgage’s amortization
- Restructure the mortgage: change the amortization, add a borrower, or move between a collateral and a conventional charge
- Take a much lower rate mid-term: if rates have fallen far enough to outweigh the penalty
What refinancing costs
Breaking a closed mortgage, paying it off early or prepaying more than your privileges allow usually costs the higher of 3 months' interest and the interest rate differential (IRD) on a fixed rate, and typically 3 months' interest on a variable rate; your mortgage contract sets the exact method and comparison rate, and a federally regulated lender must tell you how it calculates the penalty. On top of any penalty, a refinance usually means legal, appraisal and discharge fees; how to refinance your mortgage lists them, how mortgage penalties are calculated and the mortgage penalty calculator estimate the penalty, and the mortgage refinance calculator shows the new payment.
Is refinancing mid-term worth it?
Breaking your mortgage for a lower rate pays only if the saving over the rest of the term (lower payments plus a lower balance at the end of the term) exceeds the penalty and fees. Dividing the penalty by the payment difference understates the saving; the mortgage break-even calculator guide does the full comparison, and should I break my mortgage for a lower rate covers the decision and alternatives such as blend and extend.
Renewal vs refinance vs HELOC
| Scenario | Usual fit |
|---|---|
| Term is ending and you just need a new rate | Renewal (or a switch to another lender) |
| Need a lump sum from your home equity | Refinance |
| Need flexible, ongoing access to equity | HELOC |
| Want to consolidate credit card debt | Refinance (roll it into the mortgage) |
| Rate has dropped a lot with years left in the term | Run the break-even comparison; it may justify refinancing |
| Want a longer amortization to lower payments | Refinance, or ask your lender at renewal |
| Mortgage is at maturity and you don’t need more money | Renewal (cheapest and simplest) |
HELOC vs refinance compares those two ways of borrowing against your home.
The bottom line
Renewal is the simpler and cheaper path when all you need is a new term: what matters is shopping and negotiating rather than signing the first offer. Refinancing costs more and takes more work, and it is the tool for borrowing against your home, consolidating debt, restructuring the mortgage or, sometimes, taking a much lower rate mid-term.
Related reading
Sources
The figures and rules on this page come from these sources, last checked against them between September 29, 2026 and October 2, 2026. How we check facts.
- Bank of Canada: Conventional 5-year mortgage rate (data series)
- Bank of Canada: Conventional 5-year mortgage rate (data series)
- Bank of Canada: Conventional 5-year mortgage rate (data series)
- Bank of Canada: Data table
- CMHC: CMHC Purchase
- Financial Consumer Agency of Canada: Renewing your mortgage
- Financial Consumer Agency of Canada: Breaking your mortgage contract
- Financial Consumer Agency of Canada: Mortgage fees: Prepayment penalties
- Justice Laws (Canada): Eligible Mortgage Loan Regulations
- OSFI: OSFI exempts uninsured mortgage straight switches from the prescribed MQR andβ¦
- OSFI: Amendments to the minimum qualifying rate for uninsured mortgages
- RBC: Variable Rate Mortgage | RBC Royal Bank of Canada