Renewal vs refinance: what is the difference?

In Canada, a renewal starts a new term on the same balance when your current term ends, with your current lender or a new one. A refinance changes the loan itself, usually to borrow more or extend the amortization. You re-qualify under the stress test, and if you refinance mid-term, you may pay a prepayment penalty.

Renewal

Your term is the length of your current contract. When the term ends, you renew. You agree a new rate and term on the balance you still owe, and keep paying the balance down on your existing amortization schedule (the total time to pay the loan off).

At renewal you can stay with your current lender or switch to a new one with no prepayment penalty. Federally regulated lenders must send a renewal statement at least 21 days before the term ends (source: Financial Consumer Agency of Canada, checked October 2026).

If you switch lenders and keep the same amount and amortization, the move is a straight switch. Since November 21, 2024, OSFI does not expect an uninsured straight switch to a federally regulated lender to be stress-tested. Insured mortgages can also switch at renewal without re-qualifying (source: Canadian Mortgage Charter, Financial Consumer Agency of Canada briefing note, checked October 2026).

Refinance

A refinance replaces your mortgage with a new one on different terms. Common reasons are to take out equity, consolidate debts, add or remove a co-borrower, or extend the amortization to lower the payment.

With a federally regulated lender, a refinance can go up to 80% of your home's appraised value. You re-qualify at the greater of your contract rate plus 2 percentage points, or 5.25%. A refinance usually involves an appraisal and legal costs.

A worked example of a renewal and a refinance

Your home is appraised at $750,000 and your mortgage balance at maturity is $350,000.

• Renewal: you keep a $350,000 balance and choose a new term. There is generally no stress test if you stay or make a straight switch.
• Refinance: you could borrow up to 80% of $750,000, which is $600,000. Taking the balance to $420,000 to pay off a $70,000 car loan and credit cards is a refinance. You re-qualify for the larger payment, subject to lender approval.

Doing the refinance at renewal, rather than mid-term, means no prepayment penalty.

When you need a renewal and when you need a refinance

If you are happy with your balance and amortization, you need a renewal, and the main job is comparing offers. If you want to change the amount, the amortization or who is on the mortgage, you need a refinance.

Banks, credit unions and monoline lenders do both. If your income or credit has changed and a bank refinance does not fit, an alternative lender may help, usually at a higher cost.

What to do next

To compare your renewal offer with other lenders, try the renewal vs switch tool; results are estimates only, not an offer or advice. Or use our call-me-back form to talk through whether you need a renewal or a refinance.