Your Canadian Mortgage Is Renewing — Here's What to Do (2026 Guide)

How Mortgage Renewal Works in Canada

Most Canadian mortgages have a term of five years — meaning every five years, you renegotiate the interest rate with your lender, even though your amortisation period (the full repayment timeline) might be 25 years. At the end of each term, your lender sends you a renewal offer, typically 3–6 months before the expiry date.

At renewal, you have three options: accept the lender's offer as-is, negotiate a better rate with your current lender, or switch to a new lender entirely. Each path has different implications.

One significant rule change that came into effect in 2024 is worth understanding: the mortgage stress test no longer applies if you're staying with your existing lender at renewal. Previously, renewing borrowers had to requalify at the stress test rate, even if they were just rolling over with the same institution. That rule was removed by OSFI, giving homeowners more flexibility to stay put without worrying about requalification. However — and this is critical — the stress test still applies if you switch lenders. So if your financial situation has changed since you first bought, switching might not be an option, even if a competitor is offering a lower rate.

The Payment Shock Reality in 2026

Here's the uncomfortable truth for many Canadian homeowners renewing this year. If you locked in a rate below 2.5% in 2020 or 2021, you're now looking at rates in the 4.5–5.0% range. The monthly payment difference is significant.

These aren't edge cases — these are real scenarios affecting hundreds of thousands of Canadian families right now. An extra $500–$629 per month is material money. The good news is that you have more options at renewal than most people realise.

Step 1 — Start Early (120 Days Before Renewal)

Most Canadian lenders allow you to lock in a new rate up to 120 days before your renewal date. Mark your calendar and contact your lender at the 120-day mark — not a week before your renewal. Starting early gives you several advantages.

First, if rates drop further between when you lock in and your renewal date, you can generally ask your lender to honour the lower rate — most will accommodate this request to keep your business. Second, you have time to shop around without pressure. Nothing forces you into a bad decision faster than a one-week deadline.

If you're considering switching lenders, you'll need even more time — allow 45–60 days for the application, approval, and documentation process at a new institution.

Step 2 — Don't Accept the First Offer

Your lender's initial renewal offer is rarely their best rate. The big banks send renewal offers at or near their posted rates — which are intentionally inflated as a starting point. They're counting on the fact that many borrowers will sign and return the letter without question.

Calling your lender's retention department and simply asking for a better rate often works. These teams have discretion to improve the offer in order to keep your mortgage on their books. The script is simple: "I've been reviewing offers from other lenders and brokers and I've seen rates that are lower. What's the best rate you can offer me to stay?"

The math on even a modest negotiation is compelling. On a $400,000 mortgage balance:

• 0.25% rate reduction = approximately $4,000 saved over 5 years
• 0.50% rate reduction = approximately $8,000 saved over 5 years

Five minutes on the phone is worth thousands of dollars. Make the call.

Step 3 — Shop the Market

Even if your current lender comes down on their rate, get external quotes. Contact at least three sources: your current lender, at least one other major bank or credit union, and a mortgage broker.

Mortgage brokers are particularly valuable at renewal. They have access to wholesale rates from dozens of lenders — credit unions, trust companies, mono-line lenders — and they can often find rates 0.20–0.40% below what the major banks will offer directly. Their services are generally free to you; they're paid by the lender when your mortgage closes.

Online lenders and mortgage fintechs have become increasingly competitive over the last few years. Shopping takes a few hours but can realistically save you $5,000–$15,000 over your next term. Don't overlook it.

Step 4 — Choose Your Term Wisely

Renewal is not the time to just default to "same as before." Actively think about your term length in the context of where rates might be heading.

Fixed vs variable: Fixed rates offer payment certainty — you know exactly what you'll pay every month for the next 3–5 years. Variable rates have historically been lower over long periods, but they carry rate risk. In a declining rate environment, variable mortgages benefit first. In a rising environment, you're exposed.

Term length: With significant uncertainty about where rates will be in five years, many Canadians are currently choosing shorter terms — 1, 2, or 3 years — with the expectation of renewing at lower rates when those terms expire. A shorter term costs you a bit more today but gives you flexibility sooner. It's a calculated bet, not a guaranteed win.

The right answer depends on your risk tolerance, financial flexibility, and how much certainty you need in your monthly budget. There's no universally correct choice.

Step 5 — Consider Extra Payments at Renewal

Renewal is one of the best moments to restructure your mortgage, because it's a penalty-free event. If you have savings set aside, consider making a lump sum payment against your principal at renewal. This is separate from your prepayment privilege — at renewal, you can typically pay any amount toward your balance before the new term begins.

Reducing your principal balance before locking into a new rate has a compounding effect: you pay interest on a smaller balance for the full new term. A $20,000 lump sum at renewal on a $400,000 mortgage at 4.89% saves approximately $42,000 in interest over the remaining amortisation — many times the face value of the lump sum.

You can also take this opportunity to increase your payment frequency (switching from monthly to accelerated bi-weekly) or increase your regular payment amount — both strategies that can shave years off your amortisation without breaking your mortgage.

What About Breaking Your Mortgage Early?

If rates have dropped significantly and you're mid-term, you might be tempted to break your current mortgage to refinance at a lower rate. Whether this makes sense depends entirely on the penalty you'd pay.

For variable rate mortgages, the penalty is typically just three months' interest — relatively modest and predictable. For fixed rate mortgages, it's the greater of three months' interest or the Interest Rate Differential (IRD). The IRD can be enormous — many Canadians have been shocked to discover penalties of $15,000–$30,000 on large fixed mortgages. Always request a full penalty calculation from your lender before making any decision to break early. Use a mortgage calculator to determine whether the interest savings justify the penalty cost.

The bottom line on mortgage renewal in 2026: treat it as an active financial event, not a piece of paperwork to sign and forget. The difference between accepting your lender's first offer and actively negotiating and shopping the market can easily be $10,000–$20,000 over your next term. That's worth a few hours of your time.