The renewal letter from your lender is an offer, not an instruction

Few envelopes from a bank are read as quickly, or acted on as slowly, as the mortgage renewal letter. It tends to arrive with a rate already filled in and a line explaining that nothing further is required. Both parts are true, and both are only half the story. The rules that govern what the letter must contain, how early it must arrive and what happens if you leave it on the counter are federal, and they give a household more room to move than the letter suggests.

The 21-day rule and what the statement must show

If your lender is federally regulated (the banks, federal credit unions, and federal trust and loan companies), the Financial Consumer Agency of Canada sets out that it must give you a renewal statement at least 21 days before the end of the existing term. If it has decided not to renew, it must tell you that, with the same 21 days' notice. The statement itself has to show the balance that will remain at the renewal date, the interest rate on offer, the payment frequency, the term, and any charges or fees. It must also state that the rate offered will not rise before your renewal date, so the quote in the letter is a floor you can hold the lender to while you look around.

Lenders regulated by a province, which includes most credit unions and Quebec's caisses, follow their own province's disclosure rules, which are broadly similar but not identical. The 21 days is the federal minimum; many lenders write earlier, and you are free to start the conversation months ahead.

Nothing in the letter is an instruction

The renewal statement is an offer. You can accept it, negotiate it, or take the mortgage elsewhere. The FCAC's own advice is to start shopping a few months before the term ends rather than waiting for the letter, to ask your current lender for a better rate, and to show competing offers if you have them. The one trap is inaction: if you do nothing, many lenders renew automatically on the terms in the statement, and the statement will say so. That default rate is rarely the best one on the table.

Fee lists and the penalty example are taken from the FCAC's pages on renewing and on prepayment penalties. Actual penalty formulas vary by lender and are set out in your mortgage contract.

Switching at renewal: the stress test no longer applies to a straight switch

Until late 2024, a homeowner with an uninsured mortgage (a down payment of 20 per cent or more) who wanted to move to a new lender at renewal had to re-qualify at the minimum qualifying rate, the greater of the contract rate plus 2 per cent or 5.25 per cent, while someone staying put did not. The Office of the Superintendent of Financial Institutions has since changed its expectation. Its guidance now states that it does not expect lenders to apply the minimum qualifying rate for uninsured straight switches at renewal. A straight switch means moving the mortgage to another federally regulated lender with the loan amount and amortization staying the same or shrinking. Borrow more, or stretch the amortization, and the full test applies again. Insured mortgages were already exempt from re-qualifying on a switch.

The new lender still approves you on its own criteria, income and credit included, so the test's removal lowers one barrier rather than all of them. Tell the new lender about any existing mortgage insurance so you are not charged a second premium, and ask your current lender for the insurance certificate number.

Collateral charges and other things that make switching harder

Ask whether your mortgage is registered as a standard charge or a collateral charge. A collateral charge can secure other borrowing, such as a line of credit or a car loan, against the house. Moving it means repaying or transferring everything it secures, and the FCAC notes that switching this kind of mortgage can cost more. It is a question worth asking at the start of the term, not the end.

The rate printed on a renewal statement is a floor the lender must hold for you, not a ceiling on what you can get.

If the renewal payment is a stretch

Households renewing from a low rate into a higher one are not a new problem for regulators. The FCAC's Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances sets expectations for federally regulated lenders towards mortgage holders at risk of default on their principal residence. Among the relief measures it expects lenders to consider are waiving prepayment penalties when someone makes a lump-sum payment to stop negative amortization or sells the home, waiving internal fees for a limited period, not charging interest on interest, and extending the amortization for the shortest period possible with a plan to restore it. It also says a lender should not offer a less advantageous rate at renewal simply because a borrower cannot qualify elsewhere or change their terms. None of this is a right to relief, but it is a reason to call early rather than late.

Extending the amortization lowers the payment but raises the lifetime interest cost, often by thousands of dollars. The FCAC's advice is to think carefully before using it as a long-term fix.

Good to know

A fixed-rate penalty tends to be largest when your rate is above today's posted rates and you signed less than five years ago. If the penalty is large, the FCAC suggests waiting for maturity, when you can move without one.

Who this matters for, and what to check

• Anyone with a term ending in the next six months: note the maturity date and expect the statement no later than 21 days before it.
• Read the statement for the five required items (balance, rate, payment frequency, term, fees) and the line about automatic renewal.
• Ask whether your mortgage is a standard or collateral charge, and what other debts it secures.
• If switching an uninsured mortgage with the same balance and amortization, confirm with the new lender that it is treating it as a straight switch without the qualifying-rate test.
• Ask the new lender which switching fees it will cover, and your current lender for the insurance certificate number if the loan was insured.
• If the new payment is hard to carry, contact the lender before the renewal date and ask what its hardship or relief program offers.

The takeaway

A renewal statement is a disclosure document and an offer, delivered on a timetable the law sets. The 21 days are a minimum, the rate is a floor, and the signature line is optional. For most households the useful work happens in the months before the letter: knowing the charge type, comparing offers, and asking what a switch would cost. Homeowners planning their first purchase instead of a renewal may find the FHSA rules relevant, and anyone planning accessibility work around the same time can read about the two federal renovation credits.