Can You Pay Off Your Mortgage at Renewal in Canada?

Wouldn’t it feel amazing to finally say goodbye to your mortgage? For many Canadians, that dream gets real when mortgage renewal time comes around. But is it actually possible to pay off your mortgage in full when your term ends? And should you?
Let’s explore the ins and outs of paying off your mortgage at renewal in Canada — when it makes sense, what to consider financially, and what alternatives can help you become mortgage-free faster.

What Happens at Mortgage Renewal?

A mortgage renewal happens when your existing mortgage term ends — usually every 1 to 5 years — and you need to either renegotiate with your current lender or switch to another one. At renewal, you’re not reapplying for a brand-new mortgage (unless you refinance), but you do get to choose a new term, rate, and sometimes adjust your repayment structure.
Renewal is also your golden window to make big decisions — like switching lenders, increasing payments, or even paying off your entire mortgage without facing a prepayment penalty.

Can You Pay Off Your Mortgage at Renewal?

Yes — mortgage renewal is the best time to pay off your mortgage in full if you have the funds. Since your contract is expiring, most lenders allow you to pay off the remaining balance without penalty at renewal. That said, you’ll want to check your original mortgage agreement or speak to your lender to confirm.
But just because you can pay it off doesn’t always mean you should. You’ll want to think through your overall financial picture.

Should You Pay Off Your Mortgage Early?

Before you rush to empty your bank account, here are a few key questions to ask:

• Do you have at least 3 to 6 months of emergency savings?
• Have you maxed out your RRSP and TFSA contributions for the year?
• Are you carrying any high-interest debt (like credit cards or personal loans)?
• Will paying off your mortgage leave you “house rich but cash poor”?
• Could that money generate better returns if invested elsewhere?

Sometimes, holding onto a low-interest mortgage while investing your extra cash in higher-growth opportunities (like mutual funds or the stock market) can leave you further ahead financially.

Strategies to Pay Down Your Mortgage Faster

If paying off the whole mortgage at once isn’t possible — or advisable — you can still make serious progress toward becoming debt-free faster.

1. Increase Your Payment Frequency

Switch from monthly to bi-weekly accelerated payments. This simple move adds up to one full extra monthly payment per year — shaving years off your amortization.

2. Make Lump-Sum Payments

Use work bonuses, tax refunds, or inheritance money to make lump-sum payments directly toward your principal. Most lenders allow lump-sum prepayments of up to 10–20% annually.

3. Take Advantage of Prepayment Privileges

Many mortgages allow you to increase your regular payment amount once a year without penalty. Even small increases (like $100/month) can knock off thousands in interest over time.

4. Refinance Strategically

If interest rates drop or your financial situation improves, refinancing could help you reset your mortgage on more favourable terms — or give you the chance to pay down more principal faster. Just be sure to factor in penalties or legal fees if breaking your current term.

FAQs

Is there a penalty for paying off my mortgage at renewal?
Usually no — renewal is your penalty-free window to make changes, including full repayment. Still, double-check with your lender.

Should I use my savings to pay off the mortgage?
Only if it won’t wipe out your emergency fund or compromise your long-term investment goals. It’s all about balance.

How long does it take to pay off a mortgage in Canada?
Most mortgages are amortized over 25 years, but using strategies like prepayments and accelerated payments can shorten that significantly.

Is it better to pay off the mortgage or invest?
That depends on your risk tolerance and expected investment returns. If your mortgage rate is 4% but your portfolio earns 7%, investing may be the smarter move — just make sure your financial foundation is solid first.

Final Thoughts

Paying off your mortgage at renewal is absolutely possible — and sometimes it’s the smartest move you can make. But it’s not always the right decision for every household.
Before you make any big moves, take a good look at your full financial picture. Ask yourself what being mortgage-free really means for you — and whether that peace of mind is worth more than potential investment gains.
No matter what you decide, renewal time is the perfect moment to reassess, refocus, and realign your mortgage with your life goals.

💰 Ready to Pay Off Your Mortgage at Renewal?
Whether you’re looking to become mortgage-free or make a lump-sum payment, the renewal period is the perfect time to act. Let our experts walk you through the smartest financial path — penalty-free. Book a Free Mortgage Renewal Strategy Call