Mortgage renewal: compare the payment and the contract

Start with the remaining loan

A mortgage term is the length of the contract. Amortization is the projected time to repay the loan. A five-year renewal does not normally mean the mortgage will be paid off in five years.

For a useful comparison, collect the balance expected on the renewal date, the old and proposed rates, and your remaining amortization. Use 22 years plus 6 months when the statement says 22.5 years. Keep that time period the same while comparing rates, so the result isolates the rate change.

Check whether each offer uses the same payment frequency and compounding convention. This calculator uses monthly payments and Canadian semi-annual compounding; your contract may differ.

A like-for-like renewal example

With a C$400,000 balance and 22 years plus 6 months remaining, the model estimates C$1,935.95 a month at 2.50% and C$2,349.27 at 4.50%. That is C$413.33 more each month, or C$4,959.90 over a full year.

The old-rate figure is a comparison at today's remaining balance and amortization. It is not a reconstruction of your original scheduled payment. The example also excludes switching costs and assumes the entered rates stay unchanged for the projections.

Before judging affordability, put that monthly increase beside your other recurring expenses. You can save one scenario, change the current inputs and use Compare to see the two sets of assumptions side by side.

Check more than the quoted rate

For a mortgage with a federally regulated institution, the renewal statement must arrive at least 21 days before the existing term ends. FCAC suggests shopping around earlier, rather than waiting for the letter.

• Contract flexibility: ask about allowed extra payments, portability and the cost of breaking the term.
• Switching costs: ask which discharge, registration, appraisal or other fees apply, and which the new lender will cover.
• Loan registration: a collateral charge can affect the work and cost involved in switching.

Request the actual terms in writing. Two offers with the same estimated payment can have different restrictions and total costs.

A lower payment can mean a longer loan

Extending amortization can reduce the regular payment while increasing the time interest is charged. Treat it as a separate scenario, rather than mixing it into your first rate comparison.

Our renewal calculator keeps the remaining amortization the same. To explore a different repayment period, use the mortgage payment calculator with the renewal balance. Its lifetime interest figure is a constant-rate scenario, not a forecast of future renewal rates or a lender approval.