What is the difference between renewing and refinancing a mortgage in Ontario?
Renewal and refinancing are both ways to update your mortgage, but they are different processes with different implications.
Renewal happens at the end of your mortgage term. You either sign a new commitment with the same lender (often a simple form they mail you), or you transfer to a new lender. The amount you owe stays the same — only the rate and term change. Renewal is often penalty-free if done at or after maturity.
Refinancing means changing the structure of your mortgage mid-term, typically to access equity, change the loan amount, or modify the product. A refinance usually involves breaking your existing mortgage (which can trigger a prepayment penalty), paying off any existing registration, and registering a new mortgage. You go through a full new underwriting process and pay legal fees. The benefit of refinancing is accessing a lump sum of equity or getting a significantly better rate — but the costs must be weighed against those benefits.
In practice, many people confuse the terms because a lender switch at renewal involves a new legal registration and may feel like a refinance. Strictly speaking, a switch at maturity is a renewal even if you change lenders. Refinancing mid-term is what triggers a penalty. Your lawyer and mortgage broker can clarify which applies to your situation.
Key takeaways
- Renewal is a rate and term reset at maturity — no penalty and no equity access.
- Refinancing mid-term allows equity access or product changes but typically triggers a penalty.
- Both may involve new legal registrations, but only mid-term refinancing triggers a break penalty.
- Speak with a broker to decide whether the cost of refinancing mid-term is worth the benefit.