Quick answer
- A renewal is automatic at term-end; a refinance is a fresh approval that can happen any time.
- Renewals typically have no legal or appraisal fees; refinances usually do.
- You can borrow up to 80% of your home’s value through a refinance — renewals do not increase your loan.
- Breaking a mortgage mid-term to refinance triggers a prepayment penalty, which can reach five figures.
- Both options typically require you to re-qualify under the OSFI B-20 stress test if you switch lenders.
Why this decision matters in 2026
Roughly 1.2 million Canadian mortgages are coming up for renewal in 2026, and many were originally signed at pandemic-era rates near 2%. Renewing into today’s rate environment means a payment shock for most homeowners. At the same time, household debt levels are at record highs, and a growing number of borrowers are looking at refinancing not just to chase a better rate, but to consolidate credit card balances, fund renovations, or restructure their amortization.
Choosing between renewing and refinancing is the most consequential mortgage decision most Canadians will make in 2026. Renewing is fast and cheap. Refinancing is more powerful but more complex, and it usually costs money up front. Our job in this guide is to walk you through which one fits your situation — and what to watch for either way. Our companion piece, refinancing vs renewing, has the back-story.
Pick your path
You are at term-end, do not need extra cash, and just want a competitive rate without legal fees or paperwork.
You need to consolidate higher-interest debt, fund renovations, or extend amortization to reduce monthly payments.
Your term ends within 6 months — refinancing now would trigger a penalty you can avoid by renewing instead.
You are self-employed, credit-challenged, or carrying multiple properties — start with an instant pre-approval.
Renewal vs refinance: side-by-side
Run your own numbers in the mortgage refinance calculator to see whether the savings from a lower rate or consolidated debt outweigh the cost of breaking your current mortgage early.
Five steps to make the right choice
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1
Pinpoint where you are in your term Renewal makes sense within 120 days of your maturity date. Outside that window, refinancing means breaking your mortgage and triggering a penalty.
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2
Be honest about your goal A renewal locks in a new rate. A refinance can pull out equity, consolidate debt, lengthen amortization, or change lenders. Map your goal to the right product.
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3
Get the prepayment penalty in writing If you are mid-term, ask your current lender for the exact penalty figure. For 5-year fixed mortgages, the interest-rate-differential calculation can run into five figures.
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4
Check your stress-test qualification Under OSFI B-20, you typically must qualify at the greater of the contract rate plus 2% or 5.25%. Switching lenders triggers re-qualification; staying with the same lender for renewal often does not.
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5
Get three competing offers A broker shops 50+ lenders in one application. Compare your current lender’s offer with at least two outside quotes before signing anything.
Common mistakes Canadians make
- Auto-renewing with the existing lender on the first offered rate.
- Refinancing mid-term without calculating the prepayment penalty first.
- Confusing renewal (no new approval) with refinance (full new approval and stress test).
- Refinancing to consolidate debt without changing the spending behaviour that created the debt.
- Extending amortization without modelling the lifetime interest cost increase.
- Forgetting that a refinance over 80% loan-to-value is not allowed in Canada.
- Ignoring legal and appraisal fees when comparing “rate-only” savings.
Complex files: when expert help pays for itself
If your file is not straightforward — stated income, past credit issues, rental portfolios, or a cross-border purchase — the “just renew with the bank” option may not be available, and refinancing through a big-bank retail channel may not get you the best rate. Alternative lenders, monolines, and credit unions often compete aggressively for these files. Razi Khan, Founder and Mortgage Broker at Pegasus, has spent two decades placing complex renewal and refinance files with lenders that most borrowers never see at a bank branch.
Frequently asked questions
What is the difference between a mortgage renewal and a refinance?
Can I refinance my mortgage before the end of my term?
How much equity can I take out when refinancing in Canada?
Do I need to pass the stress test to renew my mortgage?
What costs are involved in refinancing a Canadian mortgage?
Should I switch lenders at renewal or stay with my current bank?
Is refinancing to consolidate credit card debt a good idea?
How early should I start the renewal process?
Get clarity on your best move
Get an instant pre-approval certificate to see exactly which lenders will compete for your renewal or refinance — in minutes.
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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
- OSFI — B-20 Residential Mortgage Underwriting Practices and Procedures. osfi-bsif.gc.ca
- CMHC — Mortgage refinancing rules in Canada. cmhc-schl.gc.ca
- Financial Consumer Agency of Canada — Mortgage prepayment penalties. canada.ca/en/financial-consumer-agency
- Bank of Canada — Policy interest rate. bankofcanada.ca
- Pegasus Mortgage Lending — refinancing vs renewing. pegasuslending.com