In the past, when it came to renewing their mortgage, many Canadians would often simply auto renew their mortgage and accept whatever their current lender was offering them. While that was never a wise idea, now, more than ever, you need to be far more diligent when it comes to your mortgage renewal.
Your mortgage is probably your biggest debt, and your home is one of your largest assets.. Additionally, your payments are likely your largest expense, therefore the decisions you make when you renew your mortgage will have a significant impact on your monthly cash flow for years. Blindly renewing your mortgage means that you could be missing out on a lot of opportunities. Also, if you’re renewing your mortgage this year, you’ll almost certainly find that your new mortgage rate will be more than the previous one, meaning your regular payments could increase. You need to have a strategy in place to deal with those higher mortgage rates.
Let’s take you through the mortgage renewal process; why it happens, why it matters and what are the most important things to watch out for this year.
Understanding the mortgage renewal process
A mortgage renewal involves negotiating a new agreement with your lender at the end of your current term (most mortgage terms are five years, but the length can vary). This process typically includes several key steps:
- Your lender sends you a renewal letter, several months before your current term expires, offering a new interest rate and terms.
- You need to review the mortgage terms and conditions to understand what’s being offered and what you might want to change.
- You should negotiate the rate and terms, either with your current lender or a new lender.
Be prepared for higher mortgage payments
Mortgage rates are higher than they were five years ago, which means that for most mortgage holders, a renewal will lead to higher mortgage payments. Here’s an example:
Jean took out a mortgage for $400,000 in 2020, with a 2.3% interest rate and a 25-year amortization period (the amount of time it will take to pay off the mortgage in full). The monthly mortgage payment was $1,752.
In 2025, Jean received a renewal letter. The remaining mortgage balance was $337,178, and the bank was offering an interest rate of 4.5% over a 20-year amortization period. Jean’s new monthly mortgage payment increased to $2,126. That's an additional $374 per month.
It’s really important to be prepared for an increase in your mortgage interest rate and therefore your mortgage payments. You need to ensure that your financial plan stays on track, regardless of the potential increased outgoings. There are strategies for reducing your mortgage payments at renewal, if necessary, but you need to be aware of them in advance.
You can learn more about “mortgage renewal shock” here.
What to watch out for, beyond rates
While your mortgage interest rate is obviously a key component of your mortgage renewal (and should be negotiated), it’s not the only important condition laid out in your new mortgage contract. You should also be aware of:
- Mortgage payments: if the change in the interest rate has made mortgage payments less affordable, you can reduce them by choosing a longer amortization period. You need to be aware, however, that this will increase the total interest you pay over the life of the loan, and your mortgage will take longer to pay off.
- Prepayment privileges: these can help you pay off your mortgage faster and avoid high prepayment penalties if you need to break your mortgage early.
Is this the best mortgage for you?
The type of mortgage that was suitable for you a few years ago may not be the best option now. When you renew your mortgage, it’s worth considering the following:
- Fixed versus variable mortgage rates: there are pros and cons to each one, with the benefits typically depending on how high interest rates currently sit and what direction they’re likely to go in. Find out more about fixed versus variable mortgage rates here.
- Open versus closed: open mortgages let you pay off the loan at any time without paying a penalty but have higher interest rates. Closed mortgages have more rules but typically offer lower rates.
Do you need to borrow more money?
When it’s time to renew your mortgage, you should also consider if a mortgage refinance makes sense. This involves changing key conditions in your mortgage, such as the amount you're borrowing or the amortization period. This could be beneficial if you:
- Want to consolidate high-interest debt.
- Plan to make a large purchase soon.
- Have home renovations planned.
- Need to reduce your monthly payments.
Renewing your mortgage is an ideal time to consider refinancing, as you can avoid prepayment penalties. Find out more about mortgage refinancing here.
What are your short-term plans?
Upcoming changes in your personal life could have a serious impact on how you should renew your mortgage. It pays to consider the following:
- Do you expect to stay in your current home?
- Is your relationship stable?
- Are you planning on growing your family?
If any likely changes in your personal life could lead to you moving in the near future, it could make sense to consider a shorter-term mortgage or an open mortgage (which can be paid off with zero penalties).
Think about your short- and long-term financial goals
Your mortgage should align with your broader financial goals. For example:
- Your planned retirement date.
- How much you want to save for retirement.
- Plans for buying a vacation or investment property.
A comprehensive mortgage strategy can help you achieve these goals by providing:
- Improved cash flow with lower mortgage payments.
- Strategies for paying down your mortgage faster.
- Ways to use your home equity to reach your financial goals faster.
Learn more about the difference between a mortgage and a mortgage strategy.
How to get a mortgage strategy when renewing your mortgage
An IG Advisor can tailor a mortgage strategy that’s suited to your unique circumstances and your financial plan. They’ll provide you with a mortgage renewal that’s designed to boost your financial plan and help you reach your financial goals sooner.
Integrating a mortgage strategy into your financial plan can give you the confidence that you’re making the right decisions to keep you on track to reach your short and long-term goals.
If you're due to renew your mortgage this year, talk to your IG Advisor to ensure you're making the best decisions for your financial future. If you don’t have an IG Advisor, you can find one here.
Written and published by IG Wealth Management as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an IG Wealth Management Advisor.
Mortgages are offered by Investors Group Trust Co. Ltd., a federally regulated trust company, and brokered by nesto Inc. Licences: Mortgage Brokerage Ontario #13044, Saskatchewan #316917, New Brunswick #180045101, Nova Scotia #202507230; Mortgage Brokerage Firm Quebec #605058; British Columbia, Alberta, Manitoba, Newfoundland/Labrador, PEI, Yukon, Nunavut, Northwest Territories.
