As a homeowner in Ontario, you’ll likely face an important decision once your mortgage term comes to an end — do you move forward with your mortgage renewal, or is it time to refinance? While these terms are often used interchangeably, they’re actually quite different — and each one has unique benefits depending on your financial goals.
Understanding the difference between mortgage renewal and refinancing can help you save money, pay off your mortgage faster, or access home equity when you need it. Here’s what every homeowner should know before making this important decision.
Understanding Mortgage Renewal
A mortgage renewal happens when your current mortgage term expires, but your overall mortgage balance is not yet paid off. Mortgage terms in Canada typically last between one and five years, while the full amortization period can stretch over 25 to 30 years. At renewal, you and your lender agree to new terms and a new interest rate for the next term.
When you renew your mortgage, you’re essentially signing a new agreement—often with new terms, rates, and conditions—while keeping the same principal balance. Your lender will typically send a renewal offer in the mail about 90–120 days before your maturity date.
Once you receive a renewal notice from your current lender — usually 90 to 120 days before your term ends — you can:
- Stay with your current lender and accept their renewal offer.
- Negotiate for a better rate or term.
- Explore offers from other lenders for more competitive options.
Renewing your mortgage gives you a chance to make small but impactful adjustments, such as changing your payment frequency, switching between fixed and variable rates, or increasing your payments to pay off your balance faster. For many homeowners, a mortgage renewal is a convenient time to reassess goals without the complexity of a full refinance.
Understanding Mortgage Refinancing
Mortgage refinancing is a more in-depth process where you replace your existing mortgage with an entirely new one—often with a different lender, a new term, or a higher loan amount. Unlike renewal, refinancing can happen at any time, not just at the end of your term (though doing so mid-term could involve a penalty).
Homeowners usually decide to refinance their mortgage for one or more of these reasons:
- To access the equity built up in their home (through a refinance loan or cash-out option)
- To secure a lower interest rate
- To consolidate high-interest debt (like credit cards or lines of credit)
- To change the mortgage structure (for example, moving from variable to fixed)
In today’s evolving real estate market, refinancing can be a powerful financial tool — especially if your home value has increased. For example, if you purchased your home five years ago and local property values have gone up, refinancing can give you access to that equity at a low interest rate to fund renovations, investments, or education.
Refinancing vs. Renewal: Key Differences
Here’s a quick breakdown of how renewal differs from refinancing:
| Feature | Mortgage Renewal | Mortgage Refinancing |
|---|---|---|
| When It Happens | At the end of your mortgage term | Anytime during your term |
| Main Purpose | Continue with your existing mortgage | Replace your mortgage or access equity |
| Lender Options | Usually same lender, but you can switch | May involve a new lender |
| Credit Check | Often not required with same lender | Required |
| Legal or Penalty Fees | Usually none | Possible prepayment penalties |
| Access to Equity | No | Yes |
In simple terms, renewing is about continuing your mortgage, while refinancing is about restructuring it to better fit your current financial situation.
When Should You Consider Refinancing?
Refinancing makes sense when the move will save or benefit you financially. Consider it if:
- You can secure a lower mortgage rate than your current one.
- You have multiple high-interest loans and want to consolidate.
- You’re planning a major expense and need access to home equity.
- Your financial goals have shifted since you first bought your home.
However, always weigh the potential savings against any penalty fees or closing costs. A local mortgage advisor can calculate your break-even point and determine if refinancing is financially worthwhile.
When Is a Mortgage Renewal the Better Choice?
If you’re happy with your mortgage structure and don’t need to access equity, a mortgage renewal might be smoother and more cost-effective. That said, take the opportunity to review your terms carefully. Even small rate differences can save thousands over the life of your loan.
Before renewing, make sure to:
- Request rate quotes from other lenders.
- Compare fixed vs. variable rates.
- Review your financial goals — perhaps consider increasing payments to pay off your mortgage faster.
A licensed mortgage professional can help you negotiate better rates and terms, even if you choose to stay with your current lender.
Which Option Is Right for You?
The decision between renewing and refinancing comes down to your current financial situation and long-term plans. If you’re satisfied with how your mortgage fits your budget, renewal may be the easiest and most cost-effective path. If you’re looking to access equity, lower your payments, or restructure debt, refinancing might be worth pursuing.
Both options can work in your favor when guided by expert advice. A licensed mortgage professional can assess your mortgage, compare offers across multiple lenders, and help you decide whether a renewal or refinance will put you closer to your financial goals.
Your mortgage should evolve with your life. As your home’s value grows and your needs change, take time to explore all available options before signing your next mortgage agreement.
Looking to compare refinancing and renewal options in Windsor? Connect with our mortgage team today to review your best opportunities and start your next term with confidence.
