What Is Mortgage Renewal?

Mortgage renewal happens at the end of your mortgage term — typically every 1 to 5 years. Your principal balance continues on a new term at a new interest rate. There is no penalty to renew or switch lenders at renewal.

Renewal is a rate decision, not a loan restructuring decision. You cannot change your mortgage amount at renewal. You can, however, switch lenders entirely — penalty-free — and a broker shops all of them for you at no cost.

What Is Mortgage Refinancing?

Refinancing means replacing your existing mortgage with a new one, before your term ends. You can refinance up to 80% of your home's appraised value. This allows you to increase your mortgage amount — to access equity, consolidate debt, or fund a renovation.

Refinancing before your term ends always carries a prepayment penalty. Understanding that penalty is the first step in deciding whether refinancing makes sense.

Side-by-Side Comparison

RenewalRefinancing
When it happensEnd of termAny time (before term ends)
PenaltyNoneYes — 3 months interest or IRD
Can change amountNoYes — up to 80% LTV
Typical timeline1–2 days2–4 weeks
Best forBetter rateAccessing equity, debt consolidation
Cost to use brokerFreeFree

When Does Refinancing Make Sense Despite the Penalty?

Refinancing before your term ends only makes sense when the financial benefit outweighs the penalty cost. Common scenarios where the math works:

  • You need to access significant home equity — renovation, investment, or a major expense
  • You're carrying high-interest consumer debt (credit cards, personal loans) that can be rolled into the mortgage at a lower rate
  • Rates have dropped enough that the savings over your remaining term exceed the penalty

A mortgage broker calculates the break-even point for you before you commit to anything. If the math doesn't work, an honest broker tells you.

The Simplest Way to Think About It

Renewal = happens automatically at term end, no penalty, rate negotiation only. Refinancing = you initiate it mid-term, penalty applies, but more flexibility.

If you're not sure which situation applies to you, the answer usually comes down to one question: has your term ended yet? If yes, you're renewing. If no, you're refinancing — and a broker will calculate whether the penalty makes it worthwhile.