- A federally regulated lender must send a renewal statement at least 21 days before your term ends, showing balance, rate, payment frequency, term and any charges or fees.
- If you do nothing, renewal may be automatic at a less favourable rate, so it pays to ask your lender for a lower one.
- Switching lenders at renewal may involve appraisal, discharge, registration and legal fees, and a new lender must approve you.
- Check prepayment privileges and charges before you sign, because they affect how easily you can sell, refinance or pay down the mortgage.
Your bank hands you a renewal letter, or it arrives by email, with a rate and a signature line. It looks routine, and many people sign it the same day. But a renewal is a new term on your mortgage, and the details can differ from what you had.
This article explains what the renewal paperwork covers, what can change, whether you need a lawyer, and how to negotiate before the term ends. It is general information. Your lender's documents and your own situation will decide the answers for you.
What the renewal letter must tell you
Federally regulated lenders must send a mortgage renewal statement at least 21 days before the end of the existing term, showing the balance, rate, payment frequency, term and any charges or fees. The statement must also say that the offered rate will not increase before the renewal date. If the lender will not renew, it must give 21 days' notice.
Those rules apply to federally regulated lenders such as banks. If your mortgage is with a credit union or private lender, the timing and content of the offer may differ, so read the document carefully and ask the lender what applies.
What can change when you renew
A renewal is not just a new rate. Read each line against your current mortgage, and look especially at the items below.
| Item to check | Why it matters |
|---|---|
| Rate and term | The renewal statement shows the rate and term being offered |
| Payment frequency | Shown in the statement, and it affects how quickly you pay down principal |
| Charges or fees | The statement must show any charges or fees |
| Prepayment privileges and charges | Lenders must set them out in a prominent information box and describe how prepayment charges are calculated; open mortgages allow extra payments without penalty, while closed mortgages limit them |
| Prepayment penalty formula | A sample disclosure shows a penalty equal to the greater of three months' interest or the interest rate differential |
| Default and returned-payment charges | A sample disclosure box shows a $50 default charge and a $40 returned-payment fee |
| Compounding | A sample disclosure box says interest is compounded twice per year but charged monthly |
If you choose a term longer than five years, a separate rule may apply. Where a mortgage on real property has principal or interest payable more than five years after the date of the mortgage, the borrower may, after five years, pay off the amount owing with three months' interest in lieu of notice. This is separate from the prepayment terms in typical 1 to 5 year closed mortgages. Ask a lawyer how it applies to your mortgage.
Do you need a lawyer to renew?
It depends on what you are doing. Renewing with your current lender often means signing a renewal agreement or accepting the offer, and whether a lawyer is involved depends on the lender and the documents. Some lenders handle it directly; others may require or recommend legal involvement, especially if other terms are changing. Ask your lender what its process is and whether it requires independent legal advice.
Switching lenders is more involved. The new lender must approve your application, and switching may involve appraisal, discharge, registration and legal fees, as well as new mortgage insurance premiums if the loan amount or amortization increases. Lender discharge fees typically range from no charge up to $400 where unregulated, and lawyer or notary fees for a discharge are typically $400 to $2,500. Federally regulated lenders must disclose the discharge fee in the mortgage contract, and most lenders do not send confirmation of payoff unless asked.
Whether or not a lawyer is required, a lawyer can review the renewal terms before you sign, particularly if you are adding or removing someone from the mortgage, changing the amount borrowed, or unsure about the penalty wording. Lender consent to changes of that kind depends on the lender and the mortgage terms.
How to negotiate before you sign
The first offer is not necessarily the best one available to you. The FCAC advises borrowers to ask their current lender for a lower rate than the renewal letter offers and to share competing offers. If you do nothing, renewal may be automatic at a less favourable rate.
- Start well before the 21-day mark, since the statement may arrive only that far ahead.
- Get written quotes from at least one or two other lenders so you have something to compare.
- Ask your lender to match or improve the rate, and ask about prepayment privileges, not only the rate.
- Ask for the total cost of switching, including legal, appraisal and discharge costs, before deciding that a lower rate is worth it.
- Do not sign until you understand each change from your current mortgage.
What to do next
- Find the date your current term ends and the date the renewal statement arrived.
- Compare the renewal letter line by line against your existing mortgage terms.
- Ask the lender for the prepayment charge formula in writing and how the penalty would be calculated today.
- Request competing offers and your lender's best written response before the term ends.
- If you are switching, ask the new lender what legal, appraisal and insurance costs you will face.
- If anything is unclear, have a lawyer review the documents before you sign.
Frequently asked questions
When should I receive my renewal letter?
A federally regulated lender must send a renewal statement at least 21 days before the end of your existing term. It must show the balance, rate, payment frequency, term and any charges or fees. Lenders that are not federally regulated may follow different timing.
What happens if I just ignore the letter?
Renewal may be automatic, and it may be at a less favourable rate. Contact your lender before the term ends and ask for a better rate.
Can I move my mortgage to another lender at renewal?
Yes, but the new lender must approve your application. Switching may involve appraisal, discharge, registration and legal fees, and new mortgage insurance premiums if the loan amount or amortization increases.
Do I need a lawyer just to renew with my own bank?
It depends on the lender and what the paperwork changes. If you are staying with your lender on the same terms, ask what its process requires. A lawyer can still review the renewal terms for you, especially if you are changing the loan or who is on it.
Sources
- Interest Act, R.S.C. 1985, c. I-15 (Justice Laws) — Justice Laws (federal)
- FCAC – Renewing your mortgage — canada.ca
- FCAC – Information box example: fixed interest mortgage — canada.ca
- FCAC – Mortgage prepayment: know your rights — canada.ca
- FCAC – Discharging a mortgage — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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