Mortgage Renewal Tips for Canadians in 2025

With many Canadians facing mortgage renewals in 2025, it's more important than ever to be prepared and informed. Renewing your mortgage is a significant financial decision, as the choices you make now can impact your finances for years to come. Here are essential tips to help you navigate the renewal process, secure the best terms, and save money in the long run.

1. Start Early and Give Yourself Time to Shop Around

Don’t wait until the last minute to start thinking about your mortgage renewal. Many lenders allow you to renew up to 120 or even 180 days before your mortgage term ends, which means you have time to explore options, compare rates, and negotiate with your current lender. By starting early, you have more leverage to shop around without the pressure of a tight deadline, helping you find a competitive rate and better terms.

2. Review Your Financial Goals and Life Changes

Your life may look different now than when you first signed your mortgage. Take a moment to assess your current financial situation, income, and long-term goals. Are you planning to pay down your mortgage faster, buy a second property, or save for other goals? Understanding your priorities will help you choose the right term length, payment frequency, and interest rate type (fixed or variable) to align with your current financial goals.

3. Negotiate With Your Current Lender, but Don’t Settle

It’s tempting to accept your current lender’s renewal offer, especially if it seems hassle-free. But remember, lenders rarely offer their lowest rates upfront. Use competing offers as leverage to negotiate better terms with your existing lender. Many lenders are willing to match or beat a competitor’s rate to keep your business. Even if you’re satisfied with your current lender, don’t settle for the first rate they offer. Negotiation can save you thousands over the term of your mortgage.

4. Consider Fixed vs. Variable Rates Carefully

The choice between a fixed and variable rate is a critical decision at renewal. Fixed rates offer stability with predictable payments, while variable rates may be lower but come with the risk of fluctuating payments. In 2025, with economic uncertainty and potential interest rate changes on the horizon, consider your comfort with risk and your financial flexibility. If peace of mind is a priority, a fixed rate may be ideal. If you’re comfortable with some risk, a variable rate could lead to savings if rates decrease. Consulting with a mortgage professional can provide personalized insights into which rate option suits your needs best.

5. Look Beyond the Rate: Compare All Mortgage Features

While interest rates are essential, don’t overlook other mortgage features that can impact your flexibility and cost savings. Prepayment options, portability, and penalties for early payoff or refinancing are all factors that can affect your mortgage’s overall value. For instance, a lender with a competitive rate but limited prepayment options may not be ideal if you plan to pay off your mortgage faster. Review the fine print of each offer and ensure you understand any potential fees or restrictions that could impact your financial freedom.

6. Take Advantage of Prepayment Privileges

Prepayment privileges allow you to pay more on your mortgage beyond the required monthly payment, which can save you money on interest over the life of your mortgage. If you can afford it, consider increasing your payment amount or making lump-sum payments. Many lenders allow up to 15% to 20% of your original mortgage amount as an annual prepayment, which can be a powerful tool in reducing your overall interest costs. At renewal, ensure you’re getting a mortgage with flexible prepayment options that suit your budget.

7. Evaluate Your Amortization Period

Renewal is a great time to review your amortization period—the number of years it will take to pay off your mortgage in full. If you’re comfortable with slightly higher payments, shortening your amortization can save you a significant amount in interest over time. Conversely, if you need to lower your monthly payments to ease cash flow, extending your amortization could offer temporary relief, though it means more interest in the long term. Understanding the impact of these options on your finances can help you make a balanced choice that meets your needs.

8. Plan for Potential Rate Increases

Interest rates have been a point of concern for Canadians, with ongoing discussions about future hikes. If you’re renewing in 2025, consider the potential for rising rates and build a buffer into your budget. Fixed rates can lock in stability, but if you choose a variable rate, have a contingency plan in case of increases. Planning ahead for rate fluctuations can help ensure you’re financially prepared and won’t feel overwhelmed by unexpected rate adjustments.

9. Consider Working with a Mortgage Broker

A mortgage broker can be a valuable ally in the renewal process, especially if you don’t have the time to shop around. Brokers have access to a broad range of lenders, rates, and mortgage products, and they can help you find the best deal based on your unique situation. Many brokers can also negotiate on your behalf and secure rates and terms that might not be available directly to consumers. Working with a broker can provide peace of mind, especially if you’re unsure about your options or want expert guidance.

10. Consider Lump-Sum Payments Before Renewing

If you have some extra savings or a recent bonus, consider making a lump-sum payment before renewing. Paying down a portion of your mortgage principal can reduce your overall balance, potentially securing a better rate for your renewed mortgage. This approach can also save you money on interest over time and bring you closer to being mortgage-free sooner.

11. Don’t Forget About Mortgage Insurance

While renewing, it’s worth reviewing your mortgage insurance policy, as needs can change over time. This could mean adjusting coverage to reflect your family’s current circumstances or even shopping around for a more cost-effective policy. Mortgage insurance protects you and your family if something unexpected happens, but it’s essential to ensure you’re not overpaying for coverage. Independent life insurance might offer more flexibility and affordability than mortgage-specific insurance from your lender, so weigh your options carefully.

Final Thoughts

Renewing your mortgage is a golden opportunity to reassess your financial situation, align your mortgage terms with your goals, and potentially save money. By taking the time to explore your options, negotiate with your lender, and consider both your short- and long-term needs, you can make a choice that supports your financial health well beyond 2025.

Whether you decide to stick with your current lender or shop around for a better rate, being proactive in your renewal process can make a world of difference. So start early, stay informed, and make the most of your mortgage renewal in 2025.