Knowing The Difference Between Renewal and Refinance


Understanding what mortgage renewal and mortgage refinance are, is important for today’s homeowner. Throughout the years we’ve noticed that some people will use the term refinance for both renewals and refinances, and also for mortgage transfers from one lender to another. Regardless of the terminology used, careful consideration is important when deciding to proceed with either renewal or refinancing. The choice between renewal and refinance can have significant financial implications, influencing not just your monthly payments, but your overall financial strategy. It’s not just about the immediate impact, but also the long-term effects on your financial health and stability. This is particularly true in the current economic climate, where interest rates and housing prices are subject to fluctuations due to various factors such as inflation, changes in the job market, and government policies.

Mortgage Renewal

Mortgage renewal is the process of extending your current mortgage term with the same lender at the end of the mortgage term. In a renewal, the mortgage amount and amortization period remain unchanged. This is a straightforward process where you accept the rate and terms offered by your lender. This option can be beneficial if you’re satisfied with your current lender and the offered interest rate is competitive.

But what does this mean in practical terms? Let’s say you have a mortgage with a term of five years. At the end of those five years, you have the option to renew your mortgage with the same lender. The lender will provide you with a renewal document that includes the new interest rate, the new term, and the remaining amortization period. If you agree to these terms, you sign the form and your mortgage is renewed for another term. This is the simplest and most straightforward option, especially if you have been satisfied with your lender and the service they have provided.

However, this doesn’t mean you should automatically renew your mortgage without doing some research. The renewal statement is usually sent a few months before the end of the term, which gives you enough time to shop around and see if there are better options available. If you don’t, you might miss out on lower rates or better terms available in the market. It’s advisable to speak with a mortgage broker before signing the renewal letter to see if other lenders can offer a better rate which can save you a substantial amount over the new term.

Mortgage Refinance

Mortgage refinance, on the other hand, is the process of renegotiating the terms of your mortgage. This could involve changing the mortgage amount, the amortization period, or even changing lenders. Refinancing can provide benefits such as accessing equity in your home for large expenses, or potentially securing a lower interest rate.

Refinancing your mortgage means you are essentially getting a new mortgage. This can be done with your current lender or a new lender. The new mortgage will pay off the old mortgage, and you will start making payments on the new mortgage. The terms of the new mortgage, including the interest rate and the amortization period, can be different from the old mortgage.

There are several reasons why you might want to refinance your mortgage. One of the most common reasons is to get a lower interest rate. If interest rates have dropped since you got your original mortgage, refinancing can help you take advantage of the lower rates. This can lower your monthly payments and save you money over the life of the loan.

Another common reason for refinancing is to access the equity in your home. If your home has increased in value, you can refinance your mortgage for more than what you owe and get the difference in cash. This can be a good way to get a large amount of money for major expenses, such as home renovations, education, or starting a business.

Refinancing might not always be the best option. There are costs associated with refinancing, including legal fees, appraisal fees, and potential penalties for breaking your current mortgage term early. These costs can add up, and it’s important to consider them when deciding whether to refinance.

However, it’s important to mention that if the refinance is done at the end of the existing term, there should be no penalties as the existing term is ending. You should also consider your long-term financial goals. If you plan to move in a few years, the costs of refinancing might outweigh the benefits.

Comparing Renewal and Refinance

When it comes to choosing between renewal and refinance, there are few things to consider. While renewal might be a simpler and more straightforward process, refinancing offers more flexibility and potential benefits. However, refinancing also comes with additional costs and complexities. It’s important to carefully consider your current financial situation, your future financial goals, the current market conditions, and the terms offered by other lenders before making a decision.

For example, if your goal is to pay off your mortgage as quickly as possible, renewing with the current lender, or switching lenders to get a lower interest rate can help you achieve that goal. On the other hand, if your goal is to lower your combined debt payments to make them more manageable, refinancing your mortgage with a longer term can help you achieve that goal.

Finally, it’s important to consider the terms offered by other lenders. Even if you’re happy with your current lender, it’s always a good idea to shop around and see what other lenders are offering. You might be able to find a better deal elsewhere.

Making the Decision

Making the right decision between renewal and refinance can be made easier by consulting with a mortgage broker that can provide valuable insights into all available options and potential implications. They will be able to crunch the numbers for you and give you a broader picture of the immediate and long-term savings, and how the costs play into the overall picture. They can also help you understand the different options and how they can affect your financial situation. They can also help you negotiate better terms if you decide to change lenders either as a transfer or refinance. This can save you a lot of time and effort, and potentially a lot of money.


In conclusion, the decision between mortgage renewal and refinance is a complex one that requires careful consideration and professional advice. Remember, the best decision is one that helps you achieve your financial goals while ensuring you can comfortably meet your mortgage payments now and in the future.

About Us

This article was brought to you by Ltd., a mortgage brokerage that is licensed with the Financial Services Regulatory Agency of Ontario (FSRA), which regulates businesses in the financial sector. The Principal Broker Sash Trajkovski has over 20 years of real estate and mortgage experience in the Ontario marketplace. You can verify our licenses by visiting the following links from FSRA’s website: our corporate license and Principal Broker license. Our mortgages services are available to all residents of Ontario. If you’re in Ontario and looking for more personalized advice and information, consider booking your Complimentary Consultation today, and let us help you understand the details that will guide you on your path to a suitable mortgage solution. Feel free to reach out to us at (519) 252-9665 during our regular business hours. Alternatively, you can fill out our contact form, and your message will be promptly emailed to us. We value your time and inquiries, and we make it our priority to respond to all messages within one business day. When reaching out, please provide us with your contact details, a brief overview of your mortgage needs, and the most convenient times for you to have a consultation. We look forward to assisting you with your mortgage.

Disclaimer: Please note that this information is current as of the date of publication and is intended to be general in nature. It is not intended to provide legal, tax, financial, or other professional advice and should not be relied upon as such. Always consult with a professional for advice tailored to your individual circumstances.

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