Quick Answer: What Happens at Mortgage Renewal?
Five things to know right now
- When your mortgage term ends in Canada, your lender offers you a new rate and term; if current rates are higher than your original rate, your monthly payment will typically increase, sometimes significantly.
- According to the Bank of Canada, borrowers who locked in a five-year fixed rate during the 2020–2021 pandemic lows may typically see their monthly payment rise by 15–20% at renewal in 2025 or 2026 — which may translate to roughly $400–$500 more per month on a $500,000 mortgage balance.
- You are not required to stay with your current lender at renewal; in many cases, switching to a new lender or working with an independent mortgage broker may allow you to access a lower rate than your current lender will offer on auto-renewal.
- CMHC-insured borrowers who switch lenders at renewal are generally exempt from re-qualifying under the OSFI B-20 stress test, provided the original mortgage amount and amortization period remain unchanged — though borrowers should confirm this with a licensed broker for their specific situation.
- Strategies to reduce payment shock at renewal include extending your amortization period, making a lump-sum prepayment before renewal, locking in early with a rate hold, or refinancing to consolidate higher-interest debt.
Why So Many Canadians Are Facing Higher Payments Right Now
If your renewal letter arrived and the new payment number made your stomach drop, you are in very good company. More than one million Canadian households are expected to renew their mortgage in 2026 alone, and the majority will be doing so at rates considerably higher than they originally locked in.
Here’s the context. During the pandemic, the Bank of Canada cut its benchmark rate to a historic low of 0.25%, and five-year fixed mortgage rates briefly fell below 1.5%. Borrowers who locked in at 1.39% or 1.9% in 2021 secured genuinely once-in-a-generation pricing. That five-year clock has now expired for hundreds of thousands of homeowners — and today’s rates, while meaningfully lower than their 2023 peak, are still approximately 230 basis points higher than pandemic lows.
According to a Bank of Canada staff analytical note, borrowers renewing five-year fixed mortgages in 2025 or 2026 may typically see their monthly payment increase by 15–20% compared to what they were paying before. For a GTA homeowner with a $500,000 balance, that may mean paying roughly $400–$500 more every month — or about $5,000 more per year.
The good news — and this is what most renewal letters won’t tell you — is that you have more options than the form you received in the mail. This article walks through what payment shock actually looks like, what type of borrower you are, and the five most effective strategies for managing your renewal. You can also use our mortgage affordability calculator to model your own situation before you speak with anyone.
Are You Fixed-Rate or Variable? Pick Your Path
Not all renewal situations are the same. Your experience at renewal depends heavily on what type of mortgage you currently hold. Understanding your path first makes the rest of this article more useful.
Path A
If you locked in a fixed rate before 2022
You likely haven’t felt any payment change yet — and the shock at renewal may be significant. You’re the primary audience for this article. Read everything, especially the five strategies in the next section.
Path B
If you have a variable-rate mortgage
You’ve already absorbed most of the rate movement. At renewal, your main question is which term to lock into next. Skip to the comparison table and FAQ section on fixed vs. variable for 2026.
If you locked in a fixed rate before 2022
Five-year fixed mortgages are the most common type in Canada — they make up roughly 40% of all outstanding loans, according to the Bank of Canada. If yours was signed in 2020 or 2021, you’re now renewing from a rate as low as 1.39%–1.9% into a market where five-year fixed rates are approximately 3.7%–4.1% (as of April 2026 — verify current rates with a licensed broker, as they change daily). That gap is real, and it translates directly to higher monthly payments.
The average payment increase for this group may be around $330–$570 per month depending on your balance. Most borrowers in this category do have meaningful equity built up over five years, which opens up options like amortization extension or refinancing that may help reduce the payment impact.
If you have a variable-rate mortgage
Variable-rate borrowers have already lived through the rate cycle. Those with adjusting payments (where the payment moved with prime) have seen payments go up and come down over the past several years. Those with fixed payments and a variable rate — sometimes called fixed-payment variable mortgages — may have been affected by the trigger rate (the point at which the payment no longer covers the interest portion of the loan, causing the balance to grow). As of 2025, the Bank of Canada found that about 12% of these mortgages were in negative amortization, though that share has been shrinking as rates have come down and borrowers renew.
At renewal, variable-rate borrowers are typically asking a different question: should I stay variable or lock in fixed? We cover that in the FAQ below.
Pegasus Mortgage Lending
How Much More Will I Pay at Renewal?
Monthly payment before vs. after renewal — renewing from 1.9% to 3.94% · 25-year amortization · monthly frequency
$400K mortgage
+$417/mo
$500K mortgage
+$521/mo
$700K mortgage
+$729/mo
Source: Calculated using the Canadian mortgage formula (semi-annual compounding per Interest Act). Prior rate of 1.9% reflects pandemic-era lows (2021). Renewal rate of 3.94% reflects best insured 5-year fixed as of April 2026 (Ratehub.ca); rates change daily — speak with a licensed broker for current figures. All examples assume 25-year amortization and monthly payment frequency. Figures are illustrative only and do not constitute financial advice. Pegasus Mortgage Lending Center Inc. FSRA Lic # 11479.
What Your Renewal Letter Won’t Tell You (And What to Do About It)
Here’s something important: federally regulated financial institutions in Canada are required to send you a renewal statement at least 21 days before your renewal date. That is not enough time to shop the market properly. By that point, you’re under pressure, and most borrowers simply sign and send it back.
If you sign your lender’s renewal offer without comparing, you may be leaving hundreds of dollars per year on the table. The reason is straightforward: your lender’s best rates are typically offered to attract new clients, not retain existing ones. An independent broker, by contrast, shops 50+ lenders including banks, credit unions, and trust companies — on your behalf, at no cost to you.
One important caveat for some GTA and BC homeowners: if you have a collateral charge mortgage (where your lender registered the property for a higher amount than your actual mortgage — common with TD Canada Trust and some other major lenders), switching lenders at renewal typically requires paying legal discharge fees. A broker can calculate whether the rate saving outweighs those costs for your specific file.
Pegasus Mortgage Lending
Your Renewal Letter vs. an Independent Broker
What auto-renewing with your bank really means — compared to shopping the full market
| Factor | Auto-Renewal Your current lender |
Independent Broker Pegasus Mortgage Lending |
|---|---|---|
| Lenders compared | 1 | 50+ |
| Rate offered | Posted / “loyalty” rate — typically not the lowest available in market | Wholesale / discounted rates from competing lenders |
| Stress test at switch | N/A — staying put, no re-qualification required | Many CMHC-insured borrowers generally exempt; broker confirms your eligibility |
| Complex files (self-employed, credit issues) |
May decline or offer restrictive terms | Access to alternative & private lenders |
| How early you can act | Renewal letter arrives ~21 days before maturity — too late to shop properly | Start 90–120 days early; rate hold available |
| Cost to you | Free | Free — broker paid by lender, not you |
Source: Pegasus Mortgage Lending internal knowledge; OSFI B-20 Guideline (stress test exemption criteria); NerdWallet Canada mortgage renewal guidance. CMHC-insured borrower stress test exemption applies when switching lenders at renewal provided original loan amount and amortization remain unchanged — confirm eligibility with a licensed broker, as individual circumstances vary. Pegasus Mortgage Lending Center Inc. FSRA Lic # 11479 · pegasuslending.com
Ready to see how your numbers could change? See how your payments could change using our refinance calculator before your renewal date.
Five Ways to Lower Your Payment at Renewal
Payment shock is real — but it’s also manageable with the right strategy. These five approaches may help reduce what you owe every month, or give you more flexibility during the next term. Not every option is right for every borrower; a licensed broker can help you model the trade-offs.
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1
Shop with an independent broker — not just your bank This is the highest-leverage move. An independent broker like Pegasus shops 50+ lenders — including banks, credit unions, monoline lenders, and trust companies — to find the most competitive rate for your specific situation. Your bank’s renewal offer is a starting point, not a ceiling. Brokers are paid by the lender, not by you, so the service is free.
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2
Start early — secure a rate hold up to 120 days before your renewal date Most lenders allow you to lock in a rate up to 120 days (about four months) before your mortgage term ends. If you find a favourable rate, you can hold it while your renewal date approaches. Some lenders may charge a small penalty for early renewal — a broker can calculate whether the saving outweighs that cost for your specific situation. Starting early also means you’re not rushed into signing the first offer that arrives.
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3
Extend your amortization period Your amortization period is the total length of time it takes to pay off your mortgage (typically 25 or 30 years). At renewal, you may be able to extend this period — which lowers your monthly payment by spreading repayment over more time. The trade-off is paying more total interest over the life of the mortgage. According to the Bank of Canada, roughly half of borrowers facing payment increases could potentially eliminate those increases by extending amortization by five years. See the chart below for the numbers.
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4
Make a lump-sum prepayment before your renewal date Many mortgage contracts allow you to make prepayments — extra payments applied directly to your principal balance — without penalty, typically up to 20% of the original mortgage amount per year. Reducing your outstanding balance before renewal means your new payment is calculated on a smaller amount. Even a $10,000 or $20,000 prepayment can meaningfully lower your monthly obligation at the next rate.
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5
Consolidate higher-interest debt at renewal If you’re carrying credit card debt, a car loan, or a line of credit at higher interest rates, renewal may be an opportunity to roll those into your mortgage — typically at a significantly lower rate. This is called refinancing for debt consolidation. It typically extends your amortization and increases your mortgage balance, but it may substantially reduce your total monthly debt load. Learn more about whether this strategy makes sense for you at our debt consolidation page.
Pegasus Mortgage Lending
Extend Your Amortization: Lower Monthly Payment, Higher Total Cost
$500,000 balance · 3.94% rate · monthly payment vs. total interest paid, across three amortization lengths
Key trade-off
Extending from 20 to 25 years saves $392/month — but costs an extra $62,800 in total interest paid over the life of the mortgage.
20 → 25 years
over loan life
| Amortization | Monthly Payment | Total Interest | vs. 20-yr |
|---|---|---|---|
| 20 years Baseline | $3,006/mo | $221,440 | — |
| 25 years | $2,614/mo ↓$392 | $284,200 | +$62,800 |
| 30 years | $2,361/mo ↓$645 | $349,960 | +$128,520 |
Source: Calculated using the Canadian mortgage formula (semi-annual compounding). $500,000 balance, 3.94% rate (best insured 5-year fixed as of April 2026, Ratehub.ca), monthly payment frequency. Per Bank of Canada Staff Analytical Note 2025-21, approximately half of borrowers facing payment increases at renewal could eliminate those increases by extending amortization by five years. Figures are illustrative only. Actual amounts depend on your balance, rate, and terms. Speak with a licensed broker. Pegasus Mortgage Lending Center Inc. FSRA Lic # 11479.
Common Mistakes That Cost Homeowners Thousands at Renewal
Most payment shock is manageable — but some of the most common renewal mistakes make it worse. Avoid these:
- Signing the first renewal offer without comparing. Your lender’s renewal letter is an offer, not the final word. Accepting it without shopping around is the single most common and costly renewal mistake. Even a 0.25% rate difference on a $500,000 mortgage can mean over $1,000 per year.
- Assuming you can’t switch lenders. Many homeowners believe they’re locked in with their current bank. You’re not — you can switch lenders at renewal, often without penalty, and access better rates elsewhere. The main exception is if you have a collateral charge mortgage, which may involve discharge fees; a broker can assess this for you.
- Waiting for the renewal letter to arrive before acting. Federally regulated lenders are only required to notify you 21 days in advance. That’s not enough time to compare, qualify, and close with a new lender. Start the process 90–120 days before your maturity date.
- Misunderstanding the stress test exemption. Many borrowers don’t know that CMHC-insured mortgages are often exempt from the OSFI B-20 stress test when switching lenders at renewal, provided the original loan amount and amortization remain unchanged. Assuming you automatically need to re-qualify may cause you to miss better rates available elsewhere. Confirm your eligibility with a licensed broker.
- Extending amortization without modelling the total interest cost. Extending your amortization lowers your monthly payment — but it can cost tens of thousands of dollars in additional interest over the life of the mortgage. It’s a valid strategy, but only when the numbers make sense for your situation.
- Not disclosing changes to income or employment. If your income has decreased, you’ve changed jobs, or become self-employed since your last renewal, your qualification picture may have changed. This is especially important if you’re switching lenders. A broker who handles complex files can help you find the right lender before you start the formal application process.
What If I Have a Complex File? (Self-Employed, Credit Challenges)
A mortgage renewal decline from your bank is not the end of the road. It’s a signal that you may need a different type of lender — not that homeownership is out of reach. Borrowers who are self-employed, have gaps in employment history, carry bruised credit, or have recently gone through a major life change (divorce, illness, job loss) may not qualify under a major bank’s standard criteria, but may qualify comfortably through an alternative lender or stated-income program.
At Pegasus, we have specialized in exactly these situations since we were founded in 2008 — during one of the most challenging lending markets in modern Canadian history. If your file is complex, Razi Khan, Founder and Mortgage Broker at Pegasus, has guided thousands of borrowers through non-standard renewal situations. There is no obligation, and the conversation is free.
Mortgage Renewal FAQ
What happens if I don’t do anything when my mortgage comes up for renewal?
If you don’t respond to your lender’s renewal offer, most federally regulated lenders will automatically renew your mortgage — often into a short-term fixed rate (typically six months or one year) at a posted rate that is higher than what you could negotiate. This is called an auto-renewal, and it is almost always the most expensive option available to you.
You lose all negotiating power, you may be locked into an unfavourable term, and you miss the opportunity to compare rates from 50+ lenders. Always respond to your renewal notice — even if it’s just to ask for a better offer.
How much more will I pay per month if my mortgage renews at a higher rate?
It depends on your remaining balance, your original rate, and today’s renewal rate. As a reference based on Bank of Canada data (as of April 2026): a borrower with a $500,000 balance renewing from approximately 1.9% to 3.94% over a 25-year amortization may see their monthly payment rise by approximately $521 per month — or roughly $6,250 more per year. Refer to the chart above for a comparison across three common mortgage sizes.
For a precise calculation, use our mortgage refinance calculator or speak with a licensed broker. Rates change frequently and the above figures are illustrative only.
Can I switch lenders when my mortgage renews, or am I stuck with my bank?
You are not stuck. You can switch to any lender at renewal — and in many cases, doing so may give you access to a better rate than your current lender will offer existing clients. The process involves a new application and approval, which a broker can handle on your behalf.
One exception to be aware of: if your mortgage is registered as a collateral charge (common with TD and some other lenders), switching typically requires paying a legal discharge fee. A broker can calculate whether the rate savings outweigh the discharge costs for your situation.
Do I have to pass the mortgage stress test again when I renew?
If you stay with your current lender, you typically do not need to re-qualify under the OSFI B-20 stress test. If you switch lenders, the stress test generally applies — except for many borrowers with CMHC-insured mortgages, who may be exempt when switching, provided the original loan amount and amortization period remain unchanged. This is one of the most misunderstood rules in the renewal process.
Confirm your eligibility with a licensed mortgage professional, as individual circumstances vary and the rules can change.
Is it better to lock in a fixed rate or go variable at my 2026 renewal?
Both options have merit depending on your financial situation and risk tolerance. A fixed rate gives you predictable payments for the full term and protection against rate increases. A variable rate is tied to the Bank of Canada’s prime rate; if the BoC cuts rates, your payment may decrease accordingly.
As of April 2026, the Bank of Canada has held its overnight rate steady at 2.25%, and most market forecasts expect rates to remain stable or potentially edge higher in 2026. In this environment, fixed rates offer more certainty — but the right choice depends on your specific situation. A broker can walk through the scenarios with you before you decide.
Can I renew my mortgage early to lock in a better rate?
Yes — most lenders allow you to renew early, typically up to 120 days (about four months) before your maturity date, and lock in a rate hold during that window. This can be valuable if rates appear to be rising and you want to secure today’s pricing.
Some lenders may charge a penalty for renewing before your term ends — a broker can model whether the saving outweighs any penalty cost. Get your instant pre-approval in minutes to understand your options before committing to anything.
What if my bank declines to renew my mortgage?
A renewal decline from your bank is not the end of homeownership — it’s a signal to look elsewhere. In Canada, there are three tiers of lenders beyond the major banks: alternative (B) lenders with more flexible qualification criteria, credit unions with community-based lending decisions, and private lenders who lend based primarily on equity rather than income. A mortgage broker who specializes in complex files can identify which tier and which specific lender is the right fit for your situation.
Acting early gives you the most options. If you suspect a renewal decline may be coming, contact a broker as far as 90–120 days before your maturity date so there is time to arrange an alternative before the clock runs out.
How far in advance should I start shopping for my mortgage renewal?
Start 90–120 days before your renewal date. That window gives you time to compare rates, qualify with a new lender if you’re switching, arrange a rate hold, and make an informed decision — without being rushed by a ticking maturity clock. Most lenders’ renewal letters arrive only 21 days before the renewal date, which is too late to shop the market properly.
Pegasus Mortgage Lending
Your Mortgage Renewal Timeline
When to start and what to do at each stage — most homeowners start too late
Contact an independent broker
▲ Start HereBegin comparing rates across 50+ lenders. This is the highest-leverage window — you have time to qualify, negotiate, and choose. Don’t wait for your bank to contact you.
Lock in a rate hold
If rates look favourable, secure a rate hold to protect against increases. A rate hold reserves today’s pricing while your renewal date approaches — especially valuable in a rising-rate environment.
Decide: term, rate type, and lender
Choose fixed vs. variable, confirm your amortization strategy, and select your lender. Your broker can model both scenarios side-by-side so you understand every trade-off before committing.
Bank renewal letter arrives
⚠ Too Late to ShopFederally regulated lenders must send your renewal statement at least 21 days before maturity — but this isn’t enough time to compare, qualify, and close with a new lender. If you haven’t started, contact a broker immediately.
Renewal date — new rate takes effect
Your new rate and term are now active. If you shopped with a broker, you’ve chosen the most competitive option available. If you haven’t responded to your lender, check your mortgage contract now — some lenders auto-renew into a short-term posted rate.
The best outcomes go to borrowers who start 90–120 days early. Pegasus shops 50+ lenders on your behalf — at no cost to you.
Get Pre-Approved →Source: OSFI B-20 Guideline — federally regulated financial institutions must provide a renewal statement at least 21 days before maturity. NerdWallet Canada and Ratehub.ca mortgage renewal guidance. The 21-day requirement applies to federally regulated lenders; provincially regulated lenders may differ. Pegasus Mortgage Lending Center Inc. FSRA Lic # 11479 · pegasuslending.com · 416-281-9628
Ready to Renew? Here’s Your Next Step
Your lender’s renewal letter is a starting point — not a final answer. The borrowers who come out ahead at renewal are the ones who start early, compare options, and understand that they have more choices than any single bank can offer them.
Pegasus shops 50+ lenders — including banks, credit unions, trust companies, and alternative lenders — to find the renewal strategy that fits your situation. There is no obligation, and our service costs you nothing: brokers are paid by lenders, not by you.
Get Your Instant Pre-Approval →Or call us at 416-281-9628 · info@pegasuslending.com
Pegasus Mortgage Lending Center Inc. FSRA Lic # 11479
About the author
Razi Khan
Founder, CEO & Licensed Mortgage Broker · Pegasus Mortgage Lending · Toronto, Ontario · FSRA Lic # 11479
Razi Khan is the Founder, CEO, and a licensed Mortgage Broker at Pegasus Mortgage Lending Center Inc., based in Toronto. With over 20 years of experience in the Canadian mortgage industry, Razi has personally guided more than 3,000 clients through some of the most complex and high-stakes financial decisions of their lives — from first-time purchases in the GTA to refinancing strategies, alternative lending solutions, and cross-border mortgages for Canadians buying in the United States.
Razi founded Pegasus in October 2008, launching the brokerage at the height of a global financial crisis. He works across the full spectrum of borrower profiles, with particular expertise in complex files including self-employed borrowers, credit-challenged clients, and investors building multi-property portfolios.
Learn more about Razi Khan →Sources & References
- Bank of Canada Staff Analytical Note 2025-21: “How will mortgage payments change at renewal? An updated analysis.” July 2025. bankofcanada.ca
- CMHC 2026 Housing Market Outlook: Mortgage renewal wave data and arrears trends. cmhc-schl.gc.ca
- TD Economics: “Mortgage Renewal Mission Possible: The Final Reckoning.” March 2026. economics.td.com
- Ratehub.ca: “Renewing your mortgage in 2026? Here’s what to expect.” April 2026. ratehub.ca
- NerdWallet Canada: “Mortgage Renewal: Common Questions, Answered.” nerdwallet.com
- MoneySense: “Renewing your mortgage: A guide for Canadians.” moneysense.ca
- OSFI Guideline B-20 — Residential Mortgage Underwriting Practices and Procedures. osfi-bsif.gc.ca
- True North Mortgage: Mortgage Rate Forecast 2026–2030. truenorthmortgage.ca