Your renewal letter is an opening offer.
Here's how to beat it.

How to get a lower rate at renewal

Roughly two in three Canadians sign the renewal letter their lender mails them. On a $400,000 balance, a quarter-point higher rate costs about $1,000 a year. Here is how to do better, in the order that matters.

The one move that beats everything else: a written quote from another lender

Your bank works with two numbers. The rate it mails you, and a lower one it holds back for customers who are ready to leave. You don't get the second number unless you put a real offer from another lender on the table. A simple "I saw something cheaper online" is a very weak lever.

One important, irreversible catch. If you apply to a bank yourself, it's a direct hit to your credit score, and once you are in a lender's system, a broker usually can't place you there for the better rate they get. So you burn the exact bank that might have won through a broker. Better get your competing numbers through one broker instead, and let them handle it professionally: many lenders compared, using only one credit check.

Lock a rate 120 days out. It's free.

You can hold a rate up to 120 days before your mortgage term matures, at no cost and no obligation. If rates fall before you renew, you re-lock lower. If they rise, you're already covered. Most people never use this because they wait for the bank's letter, and the letter shows up at the 21-day legal minimum. That's 100 days of leverage handed back to the bank.

"What's the penalty for renewing early?"

At your maturity date, there is no penalty to leave. A penalty only applies if you break the mortgage partway through the term. If you do break early, you pay the greater of three months' interest or the interest rate differential, the IRD. On a variable mortgage that's usually just the three months. On a fixed mortgage the IRD can reach into the thousands, and the bank runs the math in the way that suits the bank. The test is plain: breaking early only pays if the lower rate saves you more than the penalty costs. Get the exact penalty number before you decide anything.

Rates dropped and you're mid-term? Ask about a blend-and-extend.

Your lender can blend your current rate with today's lower one and start a fresh term. You capture some of the drop without paying a penalty to break. On paper it's rarely the cheapest option. But when the penalty to break is ugly, it's often the sensible one.

The rules changed in your favour in 2024

Since November 21, 2024, if your mortgage is uninsured (you put at least 20% down), you can move to a new lender on a straight switch, same balance and same amortization, without passing the stress test again. That test used to be the wall that kept people with their bank. Now leaving is easier.

Payment jumping? Three levers you can use.

If the new payment looks steep, you have room to work with.

1. Stretch the amortization back out. It lowers your monthly payment. You pay more interest over the life of the loan, but it buys breathing room.
2. Put down a lump sum. Renewal is the one moment you can pay down as much principal as you wish with no penalty.
3. Weigh variable against fixed for where rates sit today.

A broker can run all three against your real numbers on a short call.

Read the whole offer, not just the rate

The rate is one line of the contract. There are other conditions that cost people money later on. Check the prepayment privileges, so you know if you can pay an extra 15 to 20% a year. Check the penalty type, because a fixed-rate IRD is the trap that bites the day you move or refinance. Check whether the mortgage is portable. A slightly higher rate with fair terms will often beat a rock-bottom rate wrapped in a punishing penalty.

Figures shown are indicative and for general information only, subject to qualification and lender approval, OAC. Not a quote. A licensed mortgage broker provides your personalized quote.