The Renewal Trap
In Canada, most mortgages have a 5-year term. When your term ends, your mortgage comes up for renewal: and this is one of the most important financial moments in homeownership. Yet studies show that the majority of Canadians simply accept whatever rate their lender offers without shopping around.
That's a costly mistake. On a $500,000 mortgage balance, the difference between renewing at 4.5% versus 5.0% is about $2,500/year: or $12,500 over a 5-year term.
How Renewal Works
About 120–150 days before your mortgage term ends, your lender will send you a renewal offer. You can:
- Sign it and return it (convenient but often not the best rate)
- Negotiate with your current lender for a better rate
- Shop around and switch lenders if you find a better deal
Switching lenders at renewal is cost-free: there are no break penalties because you're renewing at the end of your term, not breaking it mid-term. This is the most important window to shop around.
Start Early: The 120-Day Window
Begin shopping for renewal rates 4 months before your renewal date. This gives you time to:
- Compare offers from multiple lenders and brokers
- Lock in a rate hold if rates look favorable
- Have your financial paperwork ready
- Transfer to a new lender if needed (takes 30–60 days to process)
How to Get the Best Rate
Step 1: Get your current lender's best offer in writing. Call and ask for their best rate, often better than what arrives in the mail. Make clear you're shopping around.
Step 2: Use a mortgage broker. A broker can access wholesale rates from 20+ lenders, rates that the general public can't access directly. This takes 30 minutes of your time and could save thousands. Brokers are paid by the lender, not you.
Step 3: Negotiate. If a broker finds a better rate elsewhere, go back to your current lender and ask them to match it. Many will, because retaining a customer costs them less than acquiring a new one.
Step 4: Consider the full package, not just the rate. A slightly lower rate with a poor pre-payment penalty or strict mortgage terms may cost more overall. Look at:
- Prepayment privileges (can you make lump-sum payments?)
- Portability (can you take the mortgage with you if you move?)
- Break penalty structure
What If Rates Are High at Renewal?
Many Ottawa homeowners who bought at low rates in 2020–2021 are now renewing into higher rate environments. Options:
- Shorter term (1–2 year fixed): If you believe rates will drop, locking in for a shorter period lets you renew again soon at potentially lower rates. The rate will be higher today, but you preserve flexibility.
- Variable rate: Same logic, variable rates tend to move down when the Bank of Canada cuts rates.
- Extend amortization: At renewal, some lenders allow you to re-extend to 25 or 30 years, reducing monthly payments. You'll pay more total interest, but it can help cash flow if needed.
If You're an Ottawa Newcomer Renewing for the First Time
If you bought your first Ottawa home 5 years ago, this renewal may be your first time going through the process. Treat it like a new mortgage application, shop around, compare multiple offers, and don't be afraid to switch lenders. Your credit history is now 5 years stronger than when you first bought, which often translates to better offers.
The Bottom Line
Renewal is not automatic. It's an opportunity. Set a reminder 4–5 months before your renewal date, and commit to spending a few hours comparing rates. The payoff is almost always worth it.
