Key Takeaway

When your Canadian mortgage term ends, you have three main options: renew with your current lender (simplest, often at a higher rate), refinance to access equity or consolidate debt (requires re-qualifying under the OSFI stress test), or switch to a new lender for a better rate (no re-qualification if you keep the same principal). Renewal makes sense when rates are competitive and you want no hassle. Refinancing works when you need cash or can secure a significantly lower rate that offsets the costs. Switching is ideal when another lender offers a better rate and you do not need to borrow more.

Your Three Options at Term End

In Canada, your mortgage term (typically one to five years) is distinct from your amortization (the full payoff period, often 25 or 30 years). At the end of each term, you must decide how to proceed. According to the Financial Consumer Agency of Canada, understanding your options at term end is critical to minimizing long-term interest costs (FCAC, 2026).

Comparison Table

OptionWhat It MeansRe-Qualification RequiredAccess to New FundsBest For
RenewalSign a new term with your current lender at their offered rateNoNoCompetitive rate, want simplicity, no extra cash needed
RefinanceBreak and renegotiate your mortgage mid-term or at term end to access equity or change termsYes (OSFI stress test)Yes (up to 80% LTV)Need cash for renovations, debt consolidation, or major expenses
Switch LendersMove to a new lender at term end for a better rate, keeping the same principalNo (if same balance)NoBetter rate available elsewhere, no need for additional funds

Option 1: Renewal

Renewal is the default path when your term expires. Your lender will send you a renewal offer, often 30 to 120 days before maturity. You sign the new term agreement, and your mortgage continues under the new rate and term length you select (another one to five years, typically).

Pros:

  • No paperwork or re-qualification under the OSFI mortgage stress test.
  • No legal fees or appraisal costs.
  • Fast and simple, ideal if you are satisfied with your current lender.

Cons:

  • The renewal rate your lender offers is often higher than the best available rates in the market. Lenders count on inertia and may not give you their most competitive offer upfront.
  • You cannot access additional equity or change your mortgage structure significantly without refinancing.

When it makes sense: You are happy with your lender, the renewal rate is competitive (compare it to current market rates from other lenders and mortgage brokers), and you do not need to borrow more or change your payment structure.

Option 2: Refinance

Refinancing means breaking your existing mortgage (either mid-term or at term end) and negotiating a new one, often with new terms, a new rate, or a higher principal to access your home equity. In Canada, you can refinance up to 80 per cent of your home’s current appraised value (the loan-to-value cap set by federal regulation). As covered in Principles of Finance, refinancing decisions hinge on comparing the cost of the new loan against the benefit of lower payments or access to capital (OpenStax, 2022).

Pros:

  • Access cash for renovations, debt consolidation, investment, or other major expenses without selling your home.
  • Potentially secure a lower interest rate if market conditions have improved since your original term.
  • Consolidate high-interest debt (credit cards, personal loans) into your mortgage at a much lower rate.

Cons:

  • You must re-qualify under the OSFI mortgage stress test (as of August 2026, you must prove you can afford payments at the greater of your contract rate plus 2 percentage points or 5.25 per cent).
  • If you refinance before your term ends, you will pay a prepayment penalty (typically three months’ interest for a variable-rate mortgage, or the interest rate differential for a fixed-rate mortgage, which can be substantial).
  • Legal fees, appraisal costs, and possible discharge fees add to the expense.

When it makes sense: You have significant equity (more than 20 per cent), you need cash for a worthwhile purpose (home improvements that increase value, paying off high-interest debt), or you can secure a rate low enough that the interest savings over the remaining amortization outweigh the refinancing costs and penalties. Refinancing is also strategic if interest rates have dropped significantly since you locked in your term.

Option 3: Switch Lenders

Switching (sometimes called transferring) means moving your mortgage to a new lender at the end of your term without increasing the principal. You negotiate a new rate and term with the new lender, and they pay out your old lender. Because you are not borrowing more, you typically do not need to re-qualify under the stress test (though the new lender will verify your income and credit).

Pros:

  • Access to better rates from competitive lenders or mortgage brokers who shop the market on your behalf.
  • No prepayment penalty if you switch exactly at term maturity.
  • Minimal fees (the new lender often covers most legal and appraisal costs to win your business).

Read also: Mid-Year 2027 Mortgage Review in Canada: Is Refinancing Worth It at Current Rates?

Cons:

  • Requires some paperwork and coordination (income verification, credit check, possibly a new appraisal).
  • You cannot access additional equity without refinancing.
  • If you switch before term end, you will trigger prepayment penalties just as with a refinance.

When it makes sense: Your current lender’s renewal rate is uncompetitive, you have good credit and stable income, another lender offers a meaningfully better rate (even 0.25 to 0.5 percentage points lower can save thousands over a five-year term), and you do not need to borrow more.

Who Should Choose Which Option?

Choose renewal if:

  • Your lender offers a competitive rate (within 0.10 to 0.20 percentage points of the best market rates).
  • You value simplicity and want to avoid paperwork.
  • You do not need extra cash and your current terms suit you.

Choose refinancing if:

  • You need to access equity for a high-value purpose (renovations, education, debt consolidation).
  • You can secure a significantly lower rate that justifies the costs and penalties.
  • You have at least 20 per cent equity and can pass the OSFI stress test.

Choose switching lenders if:

  • You find a better rate elsewhere (compare offers from at least two or three lenders or work with a licensed mortgage broker).
  • You do not need to increase your mortgage balance.
  • Your term is ending (so no penalty) or you are willing to pay the penalty if the rate savings justify it.

Making the Right Decision

Start by reviewing your renewal offer and comparing it to current market rates. The Bank of Canada publishes the policy interest rate, which influences lender rates (Bank of Canada, 2026). Contact at least two or three lenders or a mortgage broker for competing quotes. Calculate the total cost over your next term for each option, including any penalties, fees, or savings from a lower rate.

If you are considering refinancing mid-term, calculate the prepayment penalty (ask your lender for the exact figure) and compare it to the interest savings or the value of accessing equity. For a fixed-rate mortgage, the interest rate differential can be large if rates have fallen sharply.

For equity access, confirm your home’s current value (you may need an appraisal) and calculate 80 per cent of that value minus your outstanding balance to determine how much you can borrow. Remember, refinancing and switching both require proof of income and a good credit history, and refinancing requires passing the stress test (CMHC, 2026).

Conclusion

Renewal, refinancing, and switching each serve different goals. Renewal is the path of least resistance when your lender’s rate is fair. Refinancing unlocks equity and can lower your rate, but comes with costs and re-qualification. Switching gives you a better rate without borrowing more, and it is often the best move if your lender will not match the market. Compare all three options at least 90 days before your term ends, and consult a licensed mortgage broker to ensure you get the most competitive rate and terms for your situation.

Financial Disclaimer: This article provides general educational information about Canadian mortgage options and is not personalized financial, lending, legal, or tax advice, nor an offer or commitment to lend. Mortgage products, rates, prepayment penalties, and eligibility requirements vary by province, territory, and lender. The OSFI mortgage stress test, loan-to-value limits, and land transfer tax differ depending on where you live and which lender you use. Rates and terms change frequently; verify current offers with a licensed mortgage broker or financial institution before making any decision. For personal advice tailored to your circumstances, consult a licensed mortgage professional, the Financial Consumer Agency of Canada, or a qualified financial adviser.