Guide to Mortgage Renewal in Ontario

At the end of your mortgage term, you’ll need to either pay off your mortgage in full or renew your mortgage by agreeing to a new contract for an additional term.

If you still owe money on your Ontario mortgage at the end of your term, renewal is a chance to reassess your mortgage and consider what changes you may need going forward. When you renew your mortgage, you may want to renegotiate interest rates, terms and your payment schedule.

What is a mortgage renewal in Ontario?

When you took out your mortgage, you agreed to an amortization period, or the time required to completely pay back the mortgage. You also agreed to a specific term, which is typically five years but may be more or less. For example, if you took out a five-year mortgage in January 2019, your term will end in January 2024.

As you approach the end of your mortgage term, you’ll need to either pay off the balance in full or sign a new mortgage contract. Agreeing to 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. A mortgage renewal happens at a set time (at the end of a term) and involves working with a lender to extend a mortgage agreement, often with similar features to the previous agreement.

Refinancing can happen at any point during the term, and involves breaking the mortgage agreement to pursue better options, such as a lower interest rate. However, it can come with additional fees, prepayment penalties and the need to requalify for a mortgage.

How does a mortgage renewal work in Ontario?

As you near the end of your mortgage term, your lender will send you a renewal offer, also known as a renewal statement. You can choose to accept this offer, or you can review it and use the information to help you explore other options.

What is 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 these details:

The balance or remaining principal on the renewal date.
The applicable interest rate.
The frequency of payments.
The term of the agreement.
Any applicable charges or fees.

Additionally, the renewal statement must clearly state that the offered interest rate will remain unchanged until the renewal date. It must also state whether your mortgage may renew automatically if you don’t take any action in response to the statement. In this case, you likely won’t get the most competitive interest rate and terms available.

What to consider before renewing your Ontario mortgage

Renewing your mortgage in Ontario doesn’t have to simply mean signing on the bottom line of your mortgage renewal statement and renewing your mortgage with your current lender. It can be a time to carefully consider whether or not your mortgage contract is the best fit for your needs and overall financial goals.

Think about whether you’re happy with your mortgage agreement and your lender, or whether it might be time for a change. Ask yourself:

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 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 increase your mortgage to access more equity? 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, take note of some things you wish they’d do better.

How to get the best mortgage renewal rates in Ontario

Before you decide how to renew your mortgage, you’ll want to 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. However, you should do your due diligence by thoroughly comparing 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.

How to 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.

However, before you sign, consider renegotiating your interest rate. You don’t have to go with the rate your lender offers. Instead, demonstrate that you’ve done some research by showing your lender what rates their competitors are offering and asking them to match or beat those rates.

Renewing your mortgage with a different lender

If you’re going to change providers, 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 criteria like 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.