What Happens If You Don't Shop Around at Mortgage Renewal
Every five years (sometimes less), most Canadians face a renewal letter from their mortgage lender. The letter arrives, it looks official, there's a convenient signature line, and many people sign it within a few days. That signature could cost $10,000–$20,000 over the new term.
What's actually in that renewal offer
Your lender's renewal offer contains their posted rate for your chosen term — not their best available rate, and definitely not the rate a competing lender would offer you. Posted rates are the opening bid in a negotiation. Discounted rates — what you'd get after asking, or by going to a competing lender — are typically 0.2%–0.6% lower.
The dollar cost of not shopping around
On a $450,000 mortgage balance at renewal, the difference between a 5.20% posted rate and a 4.95% competitive rate over a 5-year term:
| Posted (5.20%) | Competitive (4.95%) | Difference | |
|---|---|---|---|
| Monthly payment | $2,720 | $2,657 | $63/mo |
| Interest paid (5yr term) | $107,400 | $101,600 | $5,800 |
| Balance at next renewal | $380,400 | $377,200 | $3,200 more paid down |
On a 0.25% rate difference: $5,800 in extra interest and $63/month in higher payments, all for the sake of returning a form without making a phone call.
At 0.50%: roughly $11,400 in extra interest over 5 years.
The no-stress-test advantage at renewal — and why it matters
One of the most valuable facts in Canadian mortgage law: when you renew with your existing lender without increasing the loan amount, you are not stress tested. This gives your current lender a retention tool — and gives you leverage.
They know that switching lenders requires you to pass the stress test at the new rate. If rates have risen significantly since you took out your mortgage, you might not qualify for as large a loan with a new lender. Use this dynamic to your advantage: get a competing offer, bring it back to your current lender, and ask them to match it. Many will.
When switching lenders makes sense
If the rate difference is 0.4% or more and you're confident you'll pass the stress test at the new lender, switching can be worthwhile. New lenders typically cover legal and appraisal costs as part of the switch incentive — so the move can be done at minimal out-of-pocket cost.
Your step-by-step renewal shopping process
- Start 120 days before your maturity date. This is when most lenders will allow you to lock in a rate, protecting you if rates rise before your renewal.
- Request quotes from at least three sources: your current lender, one competing bank or credit union, and one mortgage broker (who shops multiple lenders at once).
- Compare total cost, not just rate. Prepayment privileges, porting rights, and penalty calculation methods all affect the real cost. A slightly higher rate on a portable mortgage with generous prepayment privileges may beat a lower rate on a restrictive one.
- Bring the best competing offer back to your current lender. Ask them to match it. Have this conversation by phone or email, not just on the form they sent.
- Decide and lock in. The difference between the best available rate and what you settle for is money directly out of your pocket.
Use our renewal calculator to compare what your payment and total interest would look like at different renewal rates, and see exactly how much a 0.25% difference costs you over the full term.
