Mortgages & Financing
Mortgage Renewals
Refinancing
The Mortgage Renewal Trap (and how to outsmart it)
Staying loyal to your Big Bank could cost you thousands of dollars over the course of your mortgage. Here, we explore the pros and cons of switching your mortgage when your renewal date comes, and help you understand the consequences of choosing your Big Bank time and time again.
Niamh GyulayContent Marketing Specialist @ Pine
5 min read
Mortgage renewal. Two words that strike fear into the heart of every Canadian homeowner, whether they’re afraid of adjusting their rate to be the most up-to-date, or they’re wary of paperwork, bank visits, and just generally being reminded of just how huge the biggest financial decision of your life really is. That’s why when your Big Bank inevitably sends you a renewal statement, it looks like the most appealing option. Let us stop you from signing that renewal, and think about it a little deeper.
Big banks send out mortgage renewal contracts, and make it sound like it is the most convenient option - and frankly, it is. No paperwork, no stress, and no awkward bank visit in the middle of the work week. But what if we told you that that is the most expensive service your bank offers? Convenience comes at a price, and auto-renewing your mortgage with your Big Bank has a Big Bank price attached.
In 2026, hundreds of thousands of Canadians will be renewing their mortgages in a sort of 5-year-post-COVID boom. In 2021, when Canadians bought homes in record numbers, they enjoyed drastically lower rates than usual due to the financial conditions during the pandemic. Regardless of what your previous rate was, you will almost certainly experience sticker shock from your new rates in 2026. By renewing with your Big Bank, you are basically signing away thousands of dollars that you don’t actually have to pay, that doesn’t even actually go towards your mortgage.
Here’s why switching lenders at renewal is the smartest financial move you can make this year:
You may think that “long-time customers” at Big Banks would have the opportunity to get the best rates available, via their bank, for loyalty’s sake. Well, if this is how you’re finding out that that is not in fact how Big Banks operate, we’re sorry. In fact, in some cases, it sometimes works in the opposite way. The Big Banks bet on the fact that people, at the end of the day, value convenience over cost, especially if that cost isn’t immediately apparent. Switching your mortgage requires some level of effort: signing and scanning documents, getting a credit check, providing pay stubs, etc. But, the effort far outweighs the monetary costs you could save, by putting in a little extra leg work one time.
Pros of switching
Interest Savings: At Pine, the #1 piece of feedback we get from our clients is that they didn’t realize how even half a percent of interest could cost them so much money. For example, just a mere 0.5% on a mortgage that is $400K means $10K in interest over just a 5-year term! That’s an entire luxury vacation!
No Prepayment Penalties: If you bought your home in 2021, it’s likely that your 5-year mortgage term is coming to an end sometime in 2026. If that is the case, and you do want to switch your mortgage, you can switch with none of the scary penalties that your bank has threatened to charge you should you choose to switch during your mortgage term. Yes, you still have to file some paperwork, but there is no charge to switch at the end of your term.
Cons of switching
Re-qualification: You will need to treat your switched mortgage like a new application. This means proving your income, debt levels, and credit score again. However, as of November 2024, mortgage lenders do not need to conduct a stress test for mortgage switches, which is a little silver lining in the reapplication process. (Note: You may need a stress test if you have a revolving portion of your mortgage when you renew, like a HELOC, or Home Equity Line of Credit.)
Time: Yes, this process takes more time than just renewing with your Big Bank. But think of this, like your home, as an investment. Investing some time to find a lender that has better rates or better terms, and then investing the time to reapply and renew with that lender, will save you money and time in the long run.
To give you an idea of just how impactful a switch can be, look at an example below of just how far a 0.5% difference in interest can make, on a mortgage with $500,000 remaining:
Bank Renewal Offer (4.75%) | New Lender Switch Offer (4.25%) | |
|---|---|---|
Monthly Payment | $2,835 | $2.695 |
Monthly Savings | - | $140/mo |
Total Savings | - | $8,400 |
Plus: Cash Back Bonus | $0 | $500 |
Total Financial Benefit | $0 | $8,900 |
120 Days Before:
If your mortgage expires within the next four months, time is ticking already. Some final rapid-fire tips to keep in mind when you’re shopping around to switch.
Start early. Almost any lender will hold a rate for 120 days (or four months) before your renewal date. Also, sometimes, some lenders will even honour a rate drop within that period, and hold it for you.
Check the fine print. The rate isn’t the only deciding factor in whether you should switch or not. Ask about any restrictive terms that may make it expensive to switch in the future.
Ask about fees. You should explicitly ask if the lender you’re switching to will cover your discharge costs, if discharge costs are applicable. Often, the answer from many lenders is yes.
Look at every mortgage renewal as an opportunity for negotiation. The Big Banks bet on you not knowing better, and auto-renewing with them without shopping around or negotiating. By being informed, educating yourself about the options available to you, you can capitalize on the chance to potentially save yourself tens of thousands of dollars in the long run.
Mortgage term expiring? Switch to Pine for your best rate, and cash back opportunities. Apply today here.