Renewing & Refinancing Your Mortgage
Your term is ending — don't just sign the renewal letter. Here's how to get the best deal.
⚠️ The Biggest Mistake Homeowners Make
When your mortgage term ends, your lender sends a renewal letter. Most people just sign it. That's a mistake. The renewal rate is almost never the best rate available. Always shop around — even if you plan to stay with your current lender.
Renewal vs Refinancing: What's the Difference?
🔄 Renewal
Your term ends and you negotiate a new term. The mortgage balance and amortization continue.
- Happens at end of each term (usually every 5 years)
- Can stay with current lender or switch
- No penalty if done at term end
- Switching lenders is usually free
- New lender covers legal/transfer costs
💰 Refinancing
Breaking your current mortgage to get a new one — usually to access equity or get a better rate.
- Can happen anytime (but penalties apply mid-term)
- Access up to 80% of home's value
- Can consolidate debt
- Can change amortization period
- Penalties can be significant (especially fixed)
How to Get the Best Renewal Rate
Start Shopping 120 Days Before Renewal
Most lenders will hold a rate for 120 days. Start comparing rates 4 months before your term ends.
Don't Just Sign the Renewal Letter
Your lender's first offer is rarely their best. Call them and say you're shopping around. They'll almost always offer a better rate.
Get Quotes from a Mortgage Broker
Brokers can access rates from 30+ lenders. Use their quote to negotiate with your current lender.
Consider Switching Lenders
At renewal, switching lenders is usually free — the new lender covers legal and transfer costs. Don't let loyalty cost you money.
Re-evaluate Fixed vs Variable
Just because you had a fixed rate doesn't mean you should renew fixed. Look at the current rate environment and your risk tolerance.
When Refinancing Makes Sense
Refinancing costs money (penalties + legal fees), so it only makes sense if the savings outweigh the costs:
- ✅ Consolidating high-interest debt — Rolling credit card debt (20%+) into your mortgage (4-5%) can save thousands
- ✅ Accessing home equity — For renovations, investing, or major expenses
- ✅ Rate is significantly lower — If rates have dropped enough to offset the penalty
- ✅ Changing amortization — Extending to lower payments, or shortening to pay off faster
- ❌ Small rate difference — If the savings don't exceed the penalty, it's not worth it
Refinancing Costs
| Cost | Typical Amount |
|---|---|
| Prepayment Penalty (Variable) | 3 months' interest ($2,000 – $5,000) |
| Prepayment Penalty (Fixed) | IRD calculation ($5,000 – $30,000+) |
| Legal Fees | $1,000 – $2,000 |
| Appraisal Fee | $300 – $500 |
| Discharge Fee | $200 – $400 |
HELOC: An Alternative to Refinancing
A Home Equity Line of Credit (HELOC) lets you borrow against your home's equity without breaking your mortgage:
- Borrow up to 65% of home value (combined with mortgage, up to 80%)
- Variable rate, usually prime + 0.5%
- Pay interest only on what you use
- Revolving credit — borrow, repay, borrow again
- No penalty to set up (but your lender may charge fees)
📋 Renewal Checklist
☐ Mark your renewal date (start shopping 120 days before)
☐ Check current market rates
☐ Contact a mortgage broker for quotes
☐ Call your current lender and negotiate
☐ Compare total cost (rate + features + penalties)
☐ Decide: stay, switch, or refinance
☐ Consider increasing payment amount or frequency
☐ Review prepayment options in new term