TL;DR

The highest-cost mistakes happen when borrowers optimize rate headlines and ignore penalties, legal costs, appraisal costs, and timeline risk.

Renew, refinance, or switch: what each option really does

In plain language: renewal keeps your mortgage moving at term end, switching moves your mortgage to a new lender (usually same balance), and refinancing changes the mortgage amount or structure, often before term end and often with higher cost complexity.

Choose the option that solves your real objective, not just today’s rate quote.

At-a-glance comparison table

Option Primary goal Common costs and friction Best fit
Renew Continue mortgage at end of term Potentially weaker pricing if you accept lender default offer without shopping Borrowers who want fast continuity and no major structural changes
Switch Move existing mortgage to a new lender Legal, discharge/registration, appraisal, transfer fees; qualification with new lender criteria Borrowers who can improve pricing or terms with manageable switching costs
Refinance Change amount/structure, access equity, or consolidate debt Often penalties plus legal/appraisal/admin costs; possible rate and qualification tradeoffs Borrowers with clear structural goals that exceed simple renewal/switch benefits

Renewal rules and timing most borrowers overlook

FCAC guidance states that federally regulated lenders must send a renewal statement at least 21 days before the end of term, and indicate key details such as rate, term, payment frequency, and applicable charges.

Renewal inertia is expensive. If you do nothing, automatic renewal can lock you into terms that may not be your best available option.

  • Start lender and broker comparisons a few months before term end, not after the renewal package arrives.
  • Use competing offers to negotiate, even if you plan to stay with your current lender.

Switching lenders: where the real cost shows up

Switching can improve terms, but FCAC highlights costs many borrowers miss: discharge and registration, legal/notary fees, appraisal costs, and possible title-search or title-insurance costs. Collateral charge structures can add friction and cost.

Your new lender must approve the file and may use different qualification criteria than your current lender.

Refinancing: when it is worth paying more upfront

Refinancing is often used to consolidate higher-interest debt, restructure amortization, or access home equity. FCAC home-equity guidance notes borrowers may usually access up to 80% of home value in eligible structures, with product-specific limits and underwriting conditions.

Before refinancing, include all potential costs: prepayment penalty, legal, appraisal, administration, and longer-term interest impact from changed amortization or balance size.

Alternatives framework: the 5 strategic paths

  1. Negotiate and renew: best when your file is simple and your lender can match strong market pricing.
  2. Switch at term end: best when savings exceed transfer costs and timeline risk stays low.
  3. Blend-and-extend: best when you need a mid-term adjustment and your lender offers a competitive blended rate path.
  4. Refinance for structural change: best when cash access or debt consolidation objective is clear and modeled.
  5. Do nothing yet: best when penalties or uncertainty make immediate action value-negative.
refinance vs renew vs switch in Canada planning discussion for Canadian borrowers
Different goals need different mortgage tools.

Cost model checklist before you decide

  • Current balance and remaining term.
  • All break or prepayment penalties if changing mid-term.
  • Legal/notary, registration/discharge, appraisal, and admin costs.
  • Rate and payment changes under each option.
  • Total cost over the next 24-60 months, not just year one.
  • Liquidity impact on emergency buffer after closing costs.

Behavior traps that cause expensive mortgage decisions

Mental model Common trap Pragmatic correction
Anchoring Fixating on headline rate while ignoring transfer and break costs. Compare all-in 24-60 month cost per option before selecting.
Status-quo bias Auto-renewing by default without market validation. Run at least three competitive comparisons before signing.
Goal-gradient effect Rushing near renewal deadline and accepting suboptimal terms. Start review months earlier and pre-build your decision matrix.
refinance vs renew vs switch in Canada documents and calculator in warm sunset light
A scorecard prevents deadline-driven mortgage decisions.

45-day execution plan before renewal date

  1. Days 1-10: gather current mortgage terms, penalties, and renewal offer details.
  2. Days 11-20: request alternative quotes from lenders and brokers, including switch-cost assumptions.
  3. Days 21-30: model refinance scenarios only if structural goals (equity access, debt consolidation) are clear.
  4. Days 31-45: choose the path with strongest all-in cost, payment resilience, and timeline certainty.

Best next step

If your term ends in the next 3 to 6 months, run a full option comparison now before inertia narrows your choices.

Sources