Can I renew my Ontario mortgage early and will I pay a penalty?

Early mortgage renewal means agreeing to new mortgage terms before your current term expires. Most lenders will offer early renewal — sometimes as early as several months before maturity — but whether a penalty applies depends on how far in advance you renew and your lender's specific policies.

Many lenders offer a penalty-free early renewal window of 30 to 90 days before maturity. If you renew within that window, you can lock in a new rate for your next term without paying a prepayment penalty. Outside that window, renewing early is treated similarly to breaking your mortgage and a penalty — either three months' interest for variable or an IRD for fixed — would apply.

Even within a penalty-free window, the new rate you are offered for early renewal may not be the best available. Lenders sometimes offer less competitive rates for early renewal because they know the borrower is motivated to avoid a penalty. It is worth comparing the early renewal rate against other lenders or asking your broker to negotiate. If you are close to the penalty-free window, waiting a few weeks to get there can be worthwhile. Your lawyer should also review any new commitment terms if the product or lender is changing.