Your bank's renewal vs. the market.

How mortgage renewal works in Canada

Your mortgage term ends every few years even though the amortization runs much longer, and at the end of each term you have three distinct choices. A renewal means staying with your current lender for a new term, usually by signing the letter they mail you. A switch means moving the same balance to a new lender for a better rate, which on most A-lender products carries no penalty and no new legal cost. A refinance means changing the loan itself — borrowing more against your equity, consolidating debt, or extending the amortization — which does involve re-qualifying and legal work. The important thing to understand is that renewing is not automatic in your favour: the rate on the letter is a retention opening offer, and it is rarely the lender’s best, let alone the market’s.

What affects your renewal rate

The headline driver is where bond yields and the prime rate sit when your term matures, since that sets the floor for every lender. On top of that, lenders price your specific file: the size of your balance, your loan-to-value, your credit, and whether you are an existing client they expect to keep through inertia. The 120-day window before maturity matters too — federally regulated lenders will hold a rate for you that far out, and that same window is when you can move to a new lender penalty-free. Shop early and lenders compete for your file; leave it to the final weeks and you are negotiating from weakness, which is exactly what the retention offer is built to exploit.

A worked example: renewing a $380,000 balance

Suppose you are renewing a $380,000 balance with 22 years left on the amortization. The bank’s letter offers 5.29%, which on that balance works out to a monthly payment of about $2,389. A quick benchmark across the market turns up 4.89% — 40 basis points lower — at a lender willing to cover the switch costs. At 4.89% the payment drops to roughly $2,300 a month, a saving of about $89 every month. That is a little over $1,070 a year, and across a five-year term roughly $5,350 — most of it interest you would otherwise hand the bank for nothing more than the convenience of not shopping. Forty basis points sounds trivial on paper; on a real balance over a real term it is several thousand dollars.

How to get the best renewal

Start at the 120-day mark and lock a rate hold so you are protected if the market moves against you while you compare. Treat the bank’s letter as the opening bid, not the answer, and benchmark it against what other lenders are actually offering on a file like yours. Be ready to switch: the threat of leaving is what moves a retention desk, and on a straight transfer the new lender usually covers the discharge fee and appraisal, so the cost of moving is close to zero. If your finances have changed since the last term — new equity, new debt, a different income picture — ask for a refinance scenario to be modelled alongside the straight renewal, because restructuring sometimes beats simply renewing at a sharper rate.

Related scenarios

Benchmark your letter against today’s renewal rates across the market before you sign anything, and set a renewal reminder so the 120-day window never sneaks up on you. If your situation has shifted since the last term, model a refinance next to the straight renewal — occasionally the restructure, not the rate, is where the real saving sits.