Key Takeaway

When your mortgage term ends in Canada, you can switch lenders without prepayment penalties. Expect to pay a discharge fee (typically C$250 to C$400), legal or notary fees (C$500 to C$1,000), and possibly an appraisal (C$300 to C$500). The new lender often covers some or all legal costs to earn your business, but discharge fees always come from your pocket.

What You Will Learn

  • The three main costs when switching lenders at renewal
  • How to calculate whether switching saves you money
  • Which fees the new lender might cover
  • Step-by-step process for making the switch
  • Common mistakes that increase your costs

Why Switch Lenders at Renewal?

In Canada, your mortgage term (typically one to five years) is separate from your amortization (the full payoff period, often 25 or 30 years). At the end of each term, you renew your mortgage, either with your current lender or a new one. According to the Financial Consumer Agency of Canada, switching lenders at renewal gives you leverage to negotiate better rates and terms (FCAC, 2026).

Your current lender sends a renewal offer 21 to 30 days before your term ends. That offer is rarely their best rate. Shopping around can save thousands of dollars over your next term, even after paying the switching costs.

Understanding the Three Main Costs

1. Discharge Fee

The discharge fee (also called a mortgage discharge fee or payout statement fee) covers the administrative work your current lender does to release the mortgage registration from your property title. This fee typically ranges from C$250 to C$400 and varies by lender. Some financial institutions charge closer to C$350, while credit unions may charge slightly less.

You pay this fee directly to your current lender. The new lender never covers it. Budget for this cost from the start.

When you switch lenders, a lawyer or notary (in Quebec) handles the legal paperwork: registering the new mortgage, discharging the old one, and ensuring clear title. Total legal costs typically run C$500 to C$1,000, depending on your province and the complexity of your property.

The good news: many lenders offer cash-back promotions or cover your legal fees to win your business. Ask each lender you shop with whether they provide a legal fee rebate or cover costs outright. Some cover the full amount, others offer a flat rebate (such as C$500), and some cover nothing.

3. Appraisal Costs

The new lender may require a property appraisal to confirm your home’s current value before approving the new mortgage. Appraisal fees range from C$300 to C$500. Not every switch requires one. If your loan-to-value ratio is low (you have substantial equity), the lender may waive the appraisal or use an automated valuation model instead.

Some lenders cover appraisal costs as part of their promotion. Always ask upfront.

Step-by-Step: How to Switch Lenders at Renewal

Step 1: Start Shopping 120 Days Before Renewal

Begin comparing rates and terms about four months before your term ends. This gives you time to get pre-approved, compare offers, and negotiate without rushing. As foundational texts such as Principles of Finance explain, informed borrowers who compare multiple lenders secure better terms.

Step 2: Get Pre-Approved with at Least Three Lenders

Apply for pre-approval with two or three lenders. Each will run a credit check, assess your income and debt, and apply the OSFI mortgage stress test. Compare not just rates, but prepayment privileges, penalties, and term flexibility.

Step 3: Request a Payout Statement

Once you choose a new lender, request a payout statement from your current lender. This document confirms the exact balance owing on your maturity date and lists the discharge fee. Provide this to your new lender.

Your new lender may recommend a lawyer or notary. Confirm whether the lender covers legal fees and get a cost estimate in writing. The lawyer coordinates with both lenders to time the discharge and the new mortgage registration.

Step 5: Close the New Mortgage

On your maturity date, the new mortgage funds and pays out the old one. Your lawyer registers the new mortgage and discharges the old charge from title. You receive confirmation documents, and your new term begins.

Practical Tips to Minimize Costs

  • Negotiate legal fee coverage. Lenders compete for your business. If one lender offers no rebate, mention that a competitor covers C$500 and ask them to match.
  • Ask about appraisal waivers. If your equity position is strong (loan-to-value below 70 per cent), request that the lender skip the appraisal.
  • Factor in all costs. A lender offering a rate 0.10 percentage points lower but no legal rebate may cost you more over a shorter term than a lender with a slightly higher rate but full cost coverage.
  • Review the fine print. Some lenders claw back legal fee rebates if you break the mortgage early. Confirm the rebate terms.

Read also: Do You Need a Stress Test to Switch Mortgage Providers in Canada?

Common Mistakes to Avoid

Waiting until the last minute. Starting your search two weeks before renewal leaves no time to negotiate or compare. You may accept your current lender’s mediocre offer out of necessity.

Ignoring total cost. Switching costs money upfront but can save far more over the term. Calculate your net savings: (rate savings over the term) minus (discharge fee plus uncovered legal and appraisal costs). If the number is positive, switch.

Assuming your lender offers the best rate. Renewal offers are rarely competitive. The Canada Mortgage and Housing Corporation notes that many borrowers who simply accept renewal offers pay more than necessary (CMHC, 2026).

Skipping the legal review. Never sign mortgage documents without reading them or having your lawyer explain key terms. Prepayment penalties, portability restrictions, and early renewal clauses all matter.

Frequently Asked Questions

Do I pay a prepayment penalty when I switch at renewal?

No. When your term ends (at maturity), you can switch lenders, pay off the mortgage, or renew without any prepayment penalty. Penalties apply only if you break your mortgage before the term ends.

Can I switch if I have bad credit?

Possibly, but your options narrow. Lenders still apply the stress test and assess your credit. If your credit has worsened since your original mortgage, you may not qualify for the best rates or may need a B-lender, which charges higher rates.

What if the new lender’s appraisal comes in low?

A low appraisal reduces your home equity on paper, which may push your loan-to-value ratio higher. The lender might reduce the mortgage amount, require mortgage default insurance (if the ratio exceeds 80 per cent), or decline the application. You can challenge the appraisal or choose another lender.

How long does the switching process take?

From application to closing, expect 30 to 60 days. The legal work happens in the final week. Starting early ensures everything completes before your renewal date.

Conclusion

Switching mortgage lenders at renewal in Canada involves three predictable costs: the discharge fee, legal fees, and possibly an appraisal. While the discharge fee (C$250 to C$400) is unavoidable, many lenders cover legal and appraisal costs to earn your business. Compare at least three lenders, start shopping four months before your term ends, and calculate your total savings after costs. Most borrowers who switch save significantly more over the term than they spend upfront.

Mortgage products, costs, and eligibility vary by lender, province, and your financial situation. This article provides general educational information only and is not financial, legal, or lending advice. Rates and fees are as of August 2026 and change frequently. Consult a licensed mortgage broker or your financial institution to confirm current terms and determine the best option for your circumstances.