Renewing Your Mortgage in Ontario
Jan 7, 2025If you're not paying off your mortgage at the end of its term, you'll have to renew. Here's how to do it.
If you don’t pay off your mortgage at the end of its current term, you’ll find yourself participating in the mortgage renewal process.
While many Canadians approach renewal with a path-of-least-resistance mindset, renewing your mortgage is a chance to reassess your finances and decide whether you’d benefit from tweaking your mortgage contract.
As you’ll soon see, renewing your mortgage is about more than just the interest rate.
What is a mortgage renewal in Ontario?
When you took out your mortgage, you agreed to a specified term length, likely somewhere between one and five years. if you took out a five-year mortgage in July 2020, your term will end in July 2025.
At the end of your mortgage term, you’ll need to either pay off the balance in full or sign a new mortgage contract. Working toward that new contract is called a mortgage renewal.
Renewing vs. refinancing
Renewing a mortgage in Ontario is similar to refinancing, but there are important differences between the two processes:
Mortgage renewal: A mortgage renewal happens at a set time (at the end of a term) and involves working with a lender to extend the mortgage agreement.
Refinancing: Refinancing can happen at any point during the term, and involves breaking the mortgage agreement to pursue better options, often a lower interest rate. However, refinancing can come with additional fees, prepayment penalties and the need to requalify for a mortgage.
Beginning the mortgage renewal process in Ontario
Your current lender will send you a renewal offer, also known as a renewal statement, as you near the end of your mortgage. You can accept the offer, but shopping around before you do can lead to more favourable options.
What you’ll find in a mortgage renewal statement
In Ontario, as in all of Canada, mortgage providers are required to send you a renewal statement at least 21 days before your mortgage term is set to expire. A renewal statement must include:
The remaining principal.
The interest rate offered to you, which won’t change until the renewal date.
The payment frequency.
The term of the new agreement.
Any charges or fees.
The statement must also note whether your mortgage will renew automatically if you don’t take any action. While this may seem convenient, you likely won’t get a competitive interest rate by renewing automatically, and you’ll miss out on making changes that might better suit your current financial situation.
Ask these questions before renewing your Ontario mortgage
Once you’ve received your lender’s renewal offer, ask yourself:
Is this the best rate you can get? The only way to know the lowest rate available to you is to get offers from other lenders. If you’d like to stay with your current lender but want a lower rate , find a competing offer,; show it to your current lender and see if they lower their renewal rate.If the idea of negotiating stresses you out,, call a mortgage broker, who can make the process much easier.
Will a fixed or variable mortgage rate better serve your needs? Some people prefer to go with the certainty of fixed regular payments over the possible savings that could result from choosing a variable mortgage rate.
Do you want to change your payment schedule? For example, you may want to switch from monthly to bi-weekly payments.
Do you want to refinance at renewal? Some homeowners use their equity to finance big projects like home renovations.
Are you happy with the customer service offered by your lender? If not, renewing with a different lender may be a way to make homeownership a little easier.
How to get the best mortgage renewal rates in Ontario
Spend time exploring your options, including doing some research on mortgage renewal interest rates. Request quotes from various lenders by reaching out to banks, speaking with a mortgage broker or using online platforms to compare rates and terms.
Online rate platforms are particularly appealing because you can compare multiple quotes with just one application form. Remember to thoroughly compare all important factors such as interest rates, term lengths, amortization periods, estimated closing costs and other fees to make sure you’re truly comparing apples to apples.
The APR, or annual percentage rate, reflects not only the rate but also other costs associated with a mortgage, including fees. When comparing loans, especially from different lenders, you’ll want to compare the APR — not just the rate — to get the most accurate comparison. A higher rate with a lower APR will cost less over the life of the loan.
Decide where you’ll renew your mortgage in Ontario
Once you’ve thought about any potential changes you might want to make to your mortgage, and you have a good idea of current rates, it’s time to take action. At this point, you can choose to renew your mortgage with the same lender or with a new lender.
Renewing your mortgage with the same lender
If you decide to stick with your current lender and don’t want to change your mortgage terms, you’ll usually just have to sign the mortgage contract that often comes with your renewal statement.
Renewing your mortgage with a different lender
If you’re going to change lenders, waiting until the end of your current mortgage term is the best time to do so, as you won’t have to pay a prepayment penalty. Just be aware that your new provider may have different qualification requirements regarding income, debt ratios and credit scores. Switching lenders may also come with additional costs like appraisal and legal fees. You might also be required to pay a new mortgage insurance premium, so be sure to read the fine print of your new contract and be completely clear on any costs involved.
Frequently asked questions
How do Ontario mortgage renewals work?
How do Ontario mortgage renewals work?
Renewing your mortgage in Ontario is the same as renewing it in any other province. Your lender offers you a renewal statement no less than 21 days before the end of your mortgage term. You then negotiate the rate and conditions, or renew your mortgage at a different lender.
What is required to renew a mortgage in Ontario?
What is required to renew a mortgage in Ontario?
If your lender offers you a mortgage renewal offer, there shouldn't be any requirements to consider. You can accept the offer and be done with the process, or you can negotiate a better rate and different loan terms. Renewing at a different lender will require a full requalification, including income verification, a credit check and calculating your debt service ratios.
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