How Early Can You Renew Your Mortgage?
What You Should Know
- Most Canadian banks and lenders let you renew your mortgage a few months early without paying a penalty.
- The early renewal period for most lenders is between 90 and 180 days.
- You could lose out on a better rate by accepting an early renewal offer without shopping around.
Mortgages are typically renewed at the end of every term, and your lender will send you a renewal notice at least 21 days before the term ends. However, all of Canada’s major banks, including RBC, TD, Scotiabank, CIBC, and BMO, also have an early mortgage renewal option that allows you to renew 90 days to 180 days before your term ends. There is no early mortgage renewal penalty if you renew within this period. Switching lenders or renewing before your mortgage lender’s early renewal period may cause you to have to pay mortgage prepayment penalties.
How Early Can I Renew My Mortgage?
There is technically no restriction on when you can break your mortgage, and one may even break a mortgage early and switch to a lower rate before the renewal date to save money. However, renewing early often comes with prepayment penalties. Meanwhile, lenders may also send you an early renewal offer, usually four to six months before the term ends. Renewing during the early renewal period does not incur penalties. The early renewal periods of major Canadian banks and lenders are listed in the table below.
List of Early Mortgage Renewals at Canada’s Major Banks and Lenders
| Bank | Early Renewal Period | |
|---|---|---|
| RBC | Six Months (180 Days) | |
| TD | Four Months (120 Days) | |
| BMO | Four Months (120 Days) | |
| CIBC | Five Months (150 Days) | |
| Scotiabank | Six Months (180 Days) | |
| National Bank | Six Months (180 Days) | |
| Desjardins | Four Months (120 Days) | |
| ATB Financial | Three Months (90 Days) | |
| Vancity | Three Months (90 Days) | |
| B2B Bank | Four Months (120 Days) | |
| Cambrian Credit Union | Four Months (120 Days) | |
| Simplii Financial | Five Months (150 Days) | |
| Meridian Credit Union | Three Months (90 Days) | |
| Canadian Western Bank | Six Months (180 Days) | |
| Coast Capital Credit Union | 7 Months (210 Days) | |
*Updated February 2024
While early renewal may seem like a convenient option, it is not always the best option. When you accept an early renewal offer, you accept the terms offered by the lender and lose out on the opportunity to negotiate a better deal.
How Do Early Mortgage Renewals Work?
Most lenders will send you an early renewal offer 90 - 180 days before your mortgage is up for renewal. The offer document would include the rate they are offering you and the term length offered. Typically, you must sign the attached letter and send it back to the lender if you accept the offer. By accepting the offer, you will agree to renew your mortgage with the same lender at a new mortgage rate for a new term.
Most lenders specify their early mortgage renewal periods. For example,
- RBC's early mortgage renewal period is 180 days,
- TD's early mortgage renewal period is 120 days,
- Scotiabank's early mortgage renewal period is 180 days,
- BMO's early mortgage renewal period is 120 days,
- CIBC's early mortgage renewal period is 150 days.
Your mortgage contract may even specify a different length than what the lender generally offers. If you renew before the early renewal period, you are considered to be breaking your mortgage, which will come with mortgage penalties.
When does the new mortgage rate apply?
The new mortgage rate can be applied in one of two ways. Some lenders will immediately apply your new mortgage rate to your mortgage. Other lenders will continue using your old mortgage rate until the new mortgage rate is effective, which is when your mortgage is scheduled to be renewed.
For example, if your renewal date is December, but you renewed four months early in August, some lenders will apply the new mortgage rate from September, while others will apply it from December. You can ask to have your mortgage renewal contract to be effective starting the first month after the contract was signed.
Canadian Western Bank allows you to sign your mortgage renewal documents six months early, but the renewal itself will only take effect on the mortgage renewal date. Meanwhile, with National Bank, your new mortgage rate will be effective on the first payment after your mortgage renewal contract is signed.
Will an early mortgage renewal save me money?
Renewing early may be a sensible move in a rising rate environment. If mortgage rates are on the rise, you could lock in a lower rate today by renewing the mortgage early rather than renewing at a higher rate later.
However, when the rates are stable, it may be better to talk to a mortgage broker and shop around for better rates in the market. Other lenders may be willing to offer you a better rate than your current lender, and renewing your mortgage with a different lender could save you more money. In a declining rate environment, it is certainly better to avoid an early renewal.
What is the penalty for renewing your mortgage early?
There is no penalty for renewing within the lender’s prescribed early renewal period. However, you may face penalties if you renew before the early renewal period. The penalty for breaking a mortgage early is usually 3 months of interest or the interest rate differential (IRD). There may also be other fees or penalties based on the terms of the contract.
Also, some contracts may specify an early renewal period different from what the lender is offering otherwise. While you would likely have to follow the contract’s terms, you may talk to the lender and check which of the two will apply to you.
Pros and Cons of Early Mortgage Renewal
Pros of Early Mortgage Renewal
If the mortgage rates are on the rise, you can lock in a lower rate today rather than renewing at a higher rate later.
Early renewals offer you convenience, which means you don’t have to go through the process of requalifying, passing the stress test, and paying administration fees.
Cons of Early Mortgage Renewal
You could lose out on a better rate by simply accepting the early renewal offer. Other lenders in the market may be willing to offer you a better rate, which could save you thousands of dollars over the course of the next mortgage term.
If you renew your mortgage early with a different lender or renew it before the early renewal period, you may face penalties for doing so.
Should I Renew Early?
Whether renewing a mortgage early is a good decision really depends on one’s unique circumstances. Your personal or financial circumstances can influence your capacity to make payments.
Sometimes, you may want to increase your monthly payments to pay off your mortgage faster or reduce the payments and increase the amortization period. This will require you to refinance your mortgage instead of renewing it. Or, you may want to pay off the entire mortgage at once to become debt-free. For this, waiting until the renewal date and paying off the mortgage when the term expires is better to avoid prepayment penalties.
You may take into consideration the following criteria before you decide to renew your mortgage:
- Income: If your income has increased or decreased, it will impact your capacity to make payments.
- Expenses: Your monthly expenses could increase or decrease due to multiple reasons. For example, if you have a child, your expenses will likely increase. In such a scenario, you may want to reduce your mortgage payments to be able to afford your monthly expenses.
- Marital Status: If your marital status has changed, you may be able to afford more or less mortgage payment amounts.
- Financial Goals: Your short and long-term financial goals will also play an important role. You may want to tap into your home’s equity for purposes such as renovating your home or paying for your child’s education. In such a scenario, you may consider an option such as a cash-out refinance instead.
If the current mortgage rates are much lower than your existing rate, you can also consider the blend and extend option. With Blend and Extend, you can renew your mortgage for a new term early while blending your mortgage rate with the current rate offered by the lender without paying a penalty. If current rates are lower than your rate, this will reduce your rate to a rate that is in between the current rate and your existing mortgage rate.