Mortgage Renewal, Switching & Refinancing Options in Canada

As a homeowner, there may come a time when it makes sense to revisit your mortgage. For some, it's the end of their mortgage term. For others, it's an opportunity to lower their rate, switch lenders, or access home equity. Depending on your goals, understanding your options can help you make a more informed decision. 

• Reaching the end of your term and looking for a new rate? Consider renewing your mortgage.

• Want a different lender for better rates or service? Consider switching your mortgage.

• Want to borrow more, access equity, or change your payments? Consider refinancing your mortgage.

Compare Your Options

The right mortgage option depends on your timing, borrowing needs, and future plans. The comparison table highlights the key differences between renewing, switching, and refinancing. 

Renew Your Mortgage

Renewing your mortgage means signing a new mortgage agreement with your current lender when your existing term expires. In most cases, your mortgage balance stays the same while you choose a new rate, term length, and payment schedule.

You might want to renew if you:

• Want to switch between a fixed and variable rate

• Prefer a simple renewal process without changing your lender

Even if you plan to stay with your current lender, it is worth reviewing your renewal offer before signing. Mortgage rates, products, and your financial situation might have changed since you first took out your mortgage.

Switch Your Mortgage

Switching lets you move to a new lender while keeping a similar mortgage structure. Homeowners often switch to get a better rate, different features, or a better customer experience.

You might want to switch if you:

• Find a more competitive mortgage offer

• Want different mortgage features or payment flexibility

• Prefer another lender’s service, mortgage features, or digital experience 

Depending on your lender and when you switch, the costs may be lower than breaking your mortgage before the end of your term.

Refinance Your Mortgage

Refinancing replaces your existing mortgage with a new one. It can increase your mortgage amount, change your amortization period, adjust your payments, or let you access your home equity.

You might want to refinance to:

• Access home equity

• Consolidate higher-interest debt

• Adjust monthly payments

• Change your amortization period

• Move between a fixed-rate and a variable-rate mortgage

• Update mortgage features or flexibility

Because refinancing changes your mortgage, it might involve additional qualification requirements and costs, such as appraisal, legal, administrative, or prepayment fees. It also means requalifying under the mortgage stress test — a federal rule that checks whether you could still afford your payments if interest rates were higher than your actual contract rate. 

Accessing Home Equity

Many homeowners refinance to access the equity they’ve built in their home. As you pay down your mortgage and if your home’s value increases, you build equity over time. Home equity is the difference between your home’s current market value and the remaining balance on your mortgage.

Depending on your eligibility and lender requirements, you might be able to access some of that  equity through refinancing or another mortgage-related borrowing option such as a Home Equity Line of Credit (HELOC).

Homeowners commonly use home equity to:

• Renovate or improve their home

• Consolidate high-interest debt

• Cover education or other major expenses

• Help finance an investment property

• Support other long-term financial goals

For example, if your home is worth $700,000 and you owe $400,000 on your mortgage, you may be able to borrow against a portion of that $300,000 you’ve built in equity, depending on your lender’s limits and your qualifications.

Before accessing your home equity, it is important to understand how it could affect your finances. Borrowing against your home increases your mortgage balance, which might result in:

• Higher monthly payments

• A longer repayment period

• Increased borrowing costs over time

Your eligibility and borrowing limit depend on factors like your home’s current value, your remaining mortgage balance, your income, credit profile, and lender requirements.

If you are considering using your home’s equity, compare the costs and long-term impact of borrowing against your financial goals.

Renewing With Your Current Lender Vs. Shopping With A Mortgage Agent

If you’re happy with your current lender’s renewal offer, you may simply renew your mortgage. If you’d like to compare options first, you can negotiate directly with your lender, including asking them to match rates you’ve seen elsewhere.

If you’re looking for a new lender, a Mortgage Agent works with multiple lenders and compares options on your behalf. Working with a Mortgage Agent can help you:

• Compare rates and mortgage offers from multiple lenders

• Review different mortgage features and terms

• Find a mortgage that aligns with your financial goals

• Manage the application and documentation requirements

What to Compare Before Choosing a Mortgage

While the interest rate matters, it is just one part of the overall picture. The right mortgage depends on your financial goals, payment preferences, and future plans.

As you review options, consider the following.

Interest Rate

The interest rate affects your monthly payments and the total interest you pay over the life of your mortgage. Compare both fixed and variable rate options to determine which best suits your financial situation and comfort with changing interest rates.

Total Cost of Borrowing

A lower advertised rate does not always mean a lower overall cost. Review any fees, administrative charges, legal costs, or other expenses that might apply to understand the total cost of the mortgage.

Mortgage Term and Amortization

Your mortgage term determines how long your interest rate and mortgage conditions remain in effect before renewal. Your amortization period determines how long it will take to pay off your mortgage.

A longer amortization might reduce your monthly payments but increase the total interest paid over time. A shorter amortization might increase monthly payments but help you pay off your mortgage sooner.

Payment Flexibility

Look for features that fit your budget and financial goals, including:

• Payment frequency options, such as monthly, bi-weekly, or weekly payments

• Accelerated payment schedules

• The ability to increase regular payments or make lump-sum payments through prepayment privileges

Prepayment privileges could help you pay off your mortgage faster by letting you make extra payments toward your mortgage without paying a penalty, up to your lender’s allowed limit. For example, you could use a work bonus, tax refund, or other extra money to make a lump-sum payment or increase your regular payments. Paying your mortgage sooner could reduce the interest you pay over time and help you become mortgage-free earlier.

Penalties and Portability

If you expect your circumstances to change, such as moving, selling your home, or refinancing before your term ends, it is important to understand how prepayment penalties are calculated.

You might also want to confirm whether your mortgage is portable, which could allow you to transfer your existing mortgage to another property, subject to lender approval.

Customer Experience

Consider how you manage your mortgage over time. Online account access, mobile tools, customer support, and responsive service might be just as important as the mortgage itself.

What Happens During the Mortgage Application Process?

Once you have decided to renew, switch, or refinance your mortgage, the next step is completing an application.

Preparing for a Smoother Application

Before you apply, it is helpful to:

• Review your financial goals and borrowing needs

• Compare mortgage offers beyond the interest rate alone

• Gather any documents your lender might request

• Ask questions about fees, penalties, prepayment privileges, and other mortgage features before making a decision

While every lender’s process is a little different, most mortgage applications follow these four steps. 

Step 1: Submitting Your Application

You provide information about your financial situation, including your income, employment, assets, debts, and the property. You might also be asked to provide supporting documents to verify your information.

Step 2: Reviewing Your Options

If you are working with a Mortgage Agent, they review available mortgage options and help you compare rates, features, and terms from eligible lenders.

Step 3: Mortgage Conditional Approval

The lender assesses your application based on factors such as your income, credit profile, property value, and applicable lending requirements. Depending on the type of mortgage you are applying for, additional information or documentation might be requested. Your approval may also depend on meeting certain conditions before closing. For example, you might need to sell or close on your existing home, provide updated financial documents, or complete a property appraisal or inspection. 

Step 4: Finalizing Your Mortgage

Once your mortgage is approved, you’ll review and sign your documents before your new mortgage takes effect. If you are switching lenders or refinancing, your new lender will coordinate the remaining steps to complete the transition.

Ready to Find the Right Mortgage? 

Whether you're renewing, refinancing, switching lenders, or getting ready to put your home equity to work, we can help. Questrade Mortgage compares 50+ lenders across the Canadian mortgage market, giving you multiple options to evaluate in one place. A licensed mortgage agent guides you from application to closing.

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