Switching Lenders at Renewal in Canada: Costs, Timeline, and Gotchas

The Renewal Crossroads

Every year, hundreds of thousands of Canadians face a mortgage renewal. If your term is ending in 2025, you’ll soon receive a renewal offer from your current lender. But here’s the big question:

Should you sign on the dotted line, or should you switch to a new lender?

While renewing with your existing bank is convenient, switching lenders can save you thousands—if you understand the costs, process, and potential pitfalls. This guide walks you through everything you need to know about switching lenders at renewal in Canada.

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Mortgage Renewal Basics

When your mortgage term ends (often 5 years in Canada), your principal doesn’t disappear—you need to either:

1. Renew with your current lender, usually with a new term and rate.
2. Switch/transfer to another lender offering better rates or features.
3. Refinance if you want to borrow more, consolidate debt, or change your mortgage structure.

Most Canadians simply auto-renew with their current bank. But that convenience often comes at a price—renewal rates are not always competitive.

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Why Consider Switching Lenders?

• Better Rates: Competing lenders may offer lower rates than your bank’s renewal offer.
• More Flexibility: Features like better prepayment privileges or portability may be available.
• Better Service: Some lenders provide smoother digital processes, better customer service, or easier penalty structures.
• Leverage: Even if you don’t switch, having competing offers strengthens your negotiation power with your current lender.

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Costs of Switching Lenders at Renewal

Unlike breaking a mortgage mid-term, switching at renewal is penalty-free—your contract has ended. But there are still costs to consider:

a) Legal/Transfer Fees

• Usually $200–$400.
• Many lenders cover this cost to win your business.

b) Appraisal Fees

• Some lenders require an updated property appraisal ($250–$500).
• Often waived or reimbursed during promotional offers.

c) Discharge Fees

• Your old lender may charge $75–$300 to discharge the mortgage.

d) Insurance Considerations

• If you originally had a CMHC-insured mortgage, the insurance usually carries over. But in rare cases, rules may apply differently for switches.

Good news: In most cases, your net out-of-pocket cost is $0, since new lenders cover most fees.

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The Switching Timeline

Timing matters. Here’s a step-by-step timeline to follow when your renewal is approaching:

120 Days Before Renewal (4 months out)

• Start researching rates.
• Ask your current lender for a rate hold.

90 Days Before Renewal

• Talk to a broker and compare options.
• Request preliminary quotes from other lenders.

60 Days Before Renewal

• Apply with your chosen lender if switching.
• Submit documents (income, property, ID).

30–45 Days Before Renewal

• Appraisal or legal paperwork completed.
• New lender coordinates discharge with your old lender.

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Key “Gotchas” When Switching

Switching can save money, but here are the pitfalls to watch for:

• Debt Ratios: Even though you’re not borrowing more, new lenders still re-qualify you under the stress test. If your income or debt has changed, approval may be harder.
• Appraisal Surprises: If your home’s appraised value is lower than expected, it can affect your loan-to-value ratio and eligibility.
• Features Lost: Your old lender’s mortgage might have unique features (e.g., skip-a-payment) that aren’t replicated at the new one.
• Timing Delays: Missing deadlines could leave you stuck with your current lender’s default renewal rate.
• Insurance Quirks: For insured mortgages, switching is usually smooth, but double-check with your broker to avoid surprises.

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Real-Life Scenarios

Scenario A: Maria Saves at Renewal

Maria’s $400,000 mortgage is up for renewal. Her bank offers 5.2%. Another lender offers 4.7%.

Savings: On a 5-year term, that 0.5% difference = $9,000 saved.

She switches, and the new lender covers all fees.

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Scenario B: John Stays Put

John’s $300,000 mortgage is renewing. His income has dropped due to part-time work, and his debt ratios are tighter.

Although another lender offers a better rate, John can’t re-qualify under the stress test. He renews with his existing lender penalty-free.

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Scenario C: Priya’s Missed Deadline

Priya planned to switch but waited until 2 weeks before renewal. The process didn’t finish in time, and her current lender renewed her automatically at a higher rate.

Lesson: Start early to avoid default renewals.

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Negotiating Power: How to Get the Best Renewal Rate

1. Don’t accept the first offer. Lenders often send high renewal rates expecting you won’t shop around.
2. Get a broker involved. Brokers have access to multiple lenders and can compare deals.
3. Use competing offers. Even if you prefer to stay, show your bank what others are offering.
4. Time your hold. Rate holds can protect you for 90–120 days if rates rise.
5. Know your profile. Strong credit and low debt ratios give you bargaining leverage.

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Switching vs. Refinancing: Know the Difference

• Switching/Transfer: Same balance, same amortization, new lender, minimal fees.
• Refinancing: Increases balance or changes amortization, requires new mortgage registration, legal fees ($700–$1,200).

At renewal, switching is simpler and usually free, while refinancing is more expensive but allows equity access.

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Should You Switch at Renewal? A Decision Framework

Ask yourself:

• Am I getting a competitive rate from my current lender?
• Do I need new features like better prepayment terms?
• Can I qualify with another lender under the stress test?
• Do the potential savings outweigh any hassle of switching?

If the answer to most of these is “yes,” then switching could be the smarter move.

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Renewal Is an Opportunity, Not a Chore

For many Canadians, mortgage renewal is treated as a routine signature. But it’s really an opportunity to re-evaluate your options, save thousands, and align your mortgage with your financial goals.

Switching lenders at renewal can be smooth, cost-effective, and beneficial—but only if you start early, compare offers, and understand the fine print.

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