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Mortgage renewal in BC: the one moment you can change everything without a penalty

Rate is the smallest decision on the table. Here are the other four.

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Quick Takeaways

The short version, before you read the rest:

  • ·At maturity, the loan is completely open. You can pay off as much as you want, switch lenders, change your term, change your amortization, or access equity, with no penalty. Any other day of your term, most of that costs you a break penalty.
  • ·Renewal is an opportunity to plan. Since you have the opportunity to change the structure of your mortgage and pay it back without penalty, it's an important time to decide on future plans.
  • ·Start 120 days out. Most lenders will hold a rate for 120 days. That runway, with a rate hold sitting under it, is what gets you the lowest cost of borrowing more often than not.
  • ·Switching lenders means a full application. Qualifying is easier than on a refinance, because there are lots of situations where the stress test doesn't apply, but it is a real application. Most lenders cover the cost of switching. Staying put requires none of it.
  • ·Being refused a renewal is rare. It usually comes down to missed payments during the term. Keep the mortgage in good standing and an offer is highly likely.

Your mortgage comes up for renewal and a letter shows up with a rate on it. Most people sign it and mail it back. That's the single most expensive habit in Canadian mortgages, and not only because of the rate.

On your maturity date the loan is completely open. You can change almost anything about it without penalty. Rate is the decision everyone focuses on, and it crowds out the larger planning conversation.

The Mechanics

What actually happens when your mortgage comes up for renewal?

Your term ends and the remaining balance comes due. You sign a new term with your current lender, move the balance to a new lender, or pay it off. Your amortizationtypically keeps running on its existing schedule, so if you're 5 years into a 25-year mortgage, you'd have approximately 20 years left.

A few things about the process surprise people.

The renewal letter can come 6 months before your renewal date, and the first offer is rarely the last one

If your lender is federally regulated, it has to send you a renewal statement with the new rate, the term options, and the payment at least 21 days before your term ends. In practice, the retention team at your lender may start up to 6 months before your renewal date to try and get you to renew early.

Signing with your existing lender takes as long as it takes to sign

No new application, no income documents, no appraisal. The convenience factor is real.

Moving to a new lender takes about a month

A full application, income documents, a credit check, the property confirmed, roughly a month from application to funding. Which is one reason why it's important to not leave things to the last minute.

The Open Window

Why renewal is the cheapest time to restructure

Every other day of your term, changing your mortgage costs money. Break the contract mid-term and you pay a penalty, calculated either as three months of interest or as an interest rate differential.

On your maturity date that penalty is zero, because the loan is open. Which makes renewal the only moment where all of these are penalty-free:

  • ·Moving your mortgage to a different lender
  • ·Changing your amortization, subject to your lender's policy
  • ·Rolling outside debt into the mortgage through a refinance, to lower your borrowing rates and improve cash flow
  • ·Accessing equity for renovations, investments, or education funds
  • ·Restructuring the mortgage by setting up a readvanceable home equity line of credit alongside it

The Decisions

The five decisions on the table at renewal

Rate and lender: stay or switch

The obvious one. The question isn't whether the rate is good. It's whether it's the best rate available to you right now, given your situation, factoring in the time and the hassle to go through a full application process if you were to switch.

Staying with your existing lender isn't automatically the worst answer. Sometimes it's worth staying put, even when there are lower cost options out there.

Term length

Three-year fixed, five-year fixed, variable, or something in between. It depends on your circumstances and your risk tolerance.

If the idea of a variable rate is stressful, a fixed rate is probably better. Even if the variable ends up being the financially optimal choice, it isn't worth being kept up at night wondering whether your rate is going up.

The other direction: if you're planning to move in the near future, locking into a five-year fixed creates unnecessary exposure to a potentially large prepayment penalty. A variable rate or a shorter fixed term is probably better.

There's no right answer in the abstract, which is why this is a conversation to have before you sign anything.

Amortization: how long you're paying

At a straight renewal your amortization keeps running down on its existing schedule. Whether you can extend it without a full refinance depends on how your current lender registered the mortgage.

Extending it lowers your payment and costs more in total interest. Shortening it does the opposite. The right answer is circumstantial. There's a ton of rate shock out there right now, with payments jumping significantly at renewal. If cash flow is tight, it's totally fine to re-amortize your loan, just make sure you understand the drawbacks.

Debt sitting outside the mortgage

Credit cards, a line of credit, a vehicle loan. Renewal is the cheapest moment to fold them in, because there's no penalty to refinance the loan and access equity. Whether you should is a separate question. See how debt consolidation works before you decide.

A line of credit, set up while you still qualify

A readvanceable line gets set up against your equity. Even if you don't have an immediate need, you qualify once and then it sits there. You don't pay interest until you use it, the setup costs are usually minimal, and it can be a flexible financial tool. Here's how a HELOC works.

Three Transactions

Renewal, switch, or refinance: three different transactions

People use these interchangeably and they aren't the same thing.

A renewal is signing an extension of your current term with your existing lender at maturity. Same mortgage, same balance, usually the same amortization period, new rate and term length. The easiest thing in the world to do, and the easiest to overpay on.

A switch or transfermoves the same balance to a new lender at maturity. You're typically not borrowing more, but it's still a full mortgage application. Qualifying is typically easier than on a refinance, because there are lots of situations where the stress test doesn't apply. Most lenders cover the cost of switching, so moving your mortgage is usually not something you pay for out of pocket. Where something does land on you, it's typically a discharge fee from the lender you're leaving.

Some lenders let you transfer your existing mortgage and add a HELOC behind it. You keep your insured rate and still get access to your equity.

One thing to get right on a switch

Confirm in writing with your existing lender that you want an open term at maturity. Without that, your lender may auto-renew you, and being even one day late paying them out can expose you to a prepayment penalty.

A refinance is where you're replacing your existing loan with a new one. This is usually done when you're taking equity out, consolidating debt, or restructuring the loan itself. It can happen at renewal, which is the cheapest time, or mid-term, which costs a penalty. Different application, different qualifying, but a lot more flexible in terms of options available. Here's what's involved in refinancing your mortgage.

The practical difference: a switch asks whether you can carry the same debt with a different lender. A refinance asks whether you can carry more.

Renewal Refusal

Can a lender refuse to renew your mortgage?

Yes, but it's very uncommon. A straight renewal doesn't re-underwrite you, so a lender keeping a performing loan will almost always make an offer. When it doesn't happen, it's usually because payments were missed during the term.

Keep the mortgage in good standing and an offer from your existing lender is highly likely.

You also get warning. A federally regulated lender has to tell you at least 21 days before your term ends if it will not be renewing. That is not much runway, which is the whole argument for starting the conversation months earlier.

Timing

When should you start, and what about those early renewal offers?

Start at least 120 days before your renewal date. Most lenders will hold a rate for 120 days, so starting there gives you a long runway with a rate hold under it, time to watch where rates go, and the best opportunity at the lowest cost of borrowing. Waiting for the letter usually removes every option except signing it.

Early renewal offers are a different thing, and they'll find you before you go looking. Major lenders often present an early renewal as a perk, but it's really a retention strategy. They call with a special offer attached to a short decision window, to lock you in for another three to five years.

These aren't inherently bad offers. In a rising rate environment one can work in your favour. Just don't let the decision window do the deciding. You have options, and the same 120-day logic behind getting pre-approved applies here.

How We Help

How we help at renewal

We start with a 20-minute call, ideally 120 days before your maturity date. I'll ask what's changed since you last signed: income, debts, what you plan to do with the property, whether anyone's thinking about moving.

Then I take your file to the lenders who want it and bring back what's actually available, next to what your current lender has offered you, so you're comparing two real numbers instead of one number and a feeling. If staying put is the right answer, I'll tell you that, and sometimes it is.

There's no cost to you for the conversation. On a straight switch at renewal, the lender pays the broker, not you.

We work with clients across Greater Victoria and up Vancouver Island, and renewals can be handled entirely remotely.

Kyle Scott, Mortgage Broker at Landmark Mortgages in Victoria, BC (BCFSA #504479)

Landmark Mortgages

  • Phone: 250-889-1686
  • Email: kyle@landmarkmortgages.ca
  • Hours: Monday to Friday, 8 a.m. to 7 p.m.; Saturday and Sunday, 11 a.m. to 5:30 p.m.
  • License: BCFSA #504479 (verify on the BCFSA public registry)
  • Based in: Victoria, BC. Serving clients across Vancouver Island and BC.
Book a 20-minute call→Call 250-889-1686

FAQ

Mortgage renewal questions, answered

Tap a question to expand the answer.

What happens when my mortgage comes up for renewal?
Your term ends and the remaining balance comes due. You sign a new term with your current lender, move the balance to a new lender, or pay it off. Your amortization typically keeps running on its existing schedule.
Can a bank deny or refuse a mortgage renewal in Canada?
Yes, though it's very uncommon. It does happen, usually when you've missed payments through your term. If you've kept your mortgage in good standing, it's highly likely you'll receive a renewal offer from your existing lender.
How far in advance should I start my mortgage renewal?
Ideally at least 120 days before your renewal date. Most lenders will hold a rate for 120 days, which gives you a long runway, with a rate hold, to see where interest rates go. That's what gets you the best opportunity at the lowest cost of borrowing.
Is it worth renewing a mortgage early?
Major lenders often present an early renewal as a selling feature, but on their end it's really a retention strategy. They'll call with a special offer tied to a short decision window, to lock you in for another three to five years. These aren't inherently bad offers, and in a rising rate environment one can work in your favour. Just don't feel pressured into a decision, and understand that you do have options.
Should I renew for 3 or 5 years?
Deciding between a three or five year fixed, a variable rate, or something in between really depends on your individual circumstances and your risk tolerance. If the idea of a variable rate is stressful, a fixed rate is probably better. Even if the variable ends up being the financially optimal choice, it isn't worth being kept up at night worrying about whether your rate is going up. On the flip side, if you're planning on moving in the near future, locking yourself into a five year fixed creates unnecessary exposure to potentially large prepayment penalties, and a variable rate or a shorter fixed term is probably better. This is why it's important to discuss your individual situation with your mortgage broker before making a decision.
Do I have to requalify to switch lenders at renewal?
Yes. A full mortgage application is required. Qualifying is typically easier on a switch than on something like a refinance, because there are lots of situations where the stress test doesn't apply. Staying with your existing lender requires none of this, which is why sometimes the best thing to do is stay put, even when there are lower cost options out there.
Can I pay off my mortgage at renewal without a penalty?
Yes. On your maturity date the loan is completely open, and you can pay off as much as you want with no penalty. Paying it off mid-term is what triggers a break penalty.
What are the most common mortgage renewal mistakes?
Signing the first offer. Leaving it to the last minute, which typically removes every option except signing. Treating it as a rate decision only, and missing the penalty-free chance to change the structure, the amortization, or to access equity. And if you're switching lenders, not putting it in writing with your existing lender that you want an open term. Without that, being late paying them out by even one day can put you at risk of a prepayment penalty.
What happens if I don't renew my mortgage?
The balance is due at maturity. If nothing is signed and nothing is paid, the lender will usually roll you into an open term mortgage or a short closed term. Those are at a much higher interest rate, typically around 10%, but they can often be converted to a different term at any point.
How long does a mortgage renewal take?
Signing with your existing lender is quick, as long as it takes to sign. Moving to a new lender typically takes around a month from application to funding. Starting at least 120 days before your maturity date gives you a longer runway and the best opportunity to lower your cost of borrowing.

Sources

Official sources used on this page

This page provides general information about mortgage renewals in British Columbia. It is not personalized financial, legal, or tax advice. Lender policies, rate holds, qualifying rules, and penalty calculations vary by lender and change frequently. Information shown is current as of the date at the top of this page. For advice specific to your situation, please contact us directly.

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