Guide · Financing

Switching lenders at renewal: what to plan for

The end of your term is the one time you can leave without a penalty. The timeline, the stress test rule and the costs.

By Grégory Payotte, Founder of Payotte · Published

In short

Yes, you can switch lenders at maturity. A bank must send you a renewal statement at least 21 days before the end of the term. Since November 21, 2024, an uninsured mortgage moved from one federally regulated lender to another, with no increase in the amount or the amortization, is no longer subject to OSFI's minimum qualifying rate; insured mortgages have been exempt since December 2023. Adding money or extending the amortization makes it a new loan, qualified under the test. Expect some costs, and ask the new lender to cover them.

21 days
at least before the end of the term: the deadline for a bank to send your renewal statement
FCAC
Nov. 21, 2024
a straight switch of an uninsured mortgage is no longer subject to the minimum qualifying rate
OSFI
$3,000
maximum added to the balance, for transaction costs only, in a low-ratio switch without the test
Finance Canada

The timeline

If your loan is with a federally regulated institution, such as a bank, the lender must give you a renewal statement at least 21 days before the end of the term. It shows the balance at the renewal date, the rate, the payment frequency, the term and any charges. If the lender plans to renew automatically, the statement says so.

Those 21 days are a minimum, not a comfortable window to shop: comparing offers, getting the property appraised if needed and preparing documents takes time. The mortgage renewal guide works out your new payment at today’s rate.

The stress test: when it still applies

Switching lenders at maturity: stress test or not
Your situationMinimum qualifying rateSource
Uninsured mortgage moved from one federally regulated lender to another, with no increase in the amount or the remaining amortizationNo longer prescribed by OSFI since Nov. 21, 2024OSFI
Low-ratio mortgage (80% of value or less) originated at a federal lender, same amortization schedule, balance up by $3,000 at most for costs, no equity take-outRemoved for portfolio insurance applications submitted since Dec. 16, 2024Finance Canada
Insured mortgage switching lenders at renewalNo requalification required under the regulations (statement of Dec. 12, 2023)Finance Canada
You add money, extend the amortization or refinanceThe greater of 5.25% or your rate + 2 pointsOSFI, FCAC
Lender that is not federally regulatedIt may also ask you to pass the testFCAC

OSFI's minimum qualifying rate (MQR) is “the greater of the mortgage contract rate plus 2% or 5.25%”. See the stress test guide.

The costs to expect

According to FCAC, switching lenders can involve setup fees with the new lender, which may include discharge, registration, transfer or assignment fees, as well as appraisal or administration fees. FCAC suggests asking the new lender whether it will pay some or all of those costs. The mortgage discharge fees guide breaks down the bill from the lender you leave.

Also check your loan’s charge type. With a collateral charge mortgage, switching lenders can cost extra fees, and every loan secured by that charge must be repaid or transferred to the new lender.

Before you sign the renewal

  • Note your term’s end date and the statement deadline (21 days before).
  • Ask for offers keeping the same amount and the same remaining amortization, if you want to stay within the straight-switch rules.
  • List the exit costs and ask who pays them.
  • Check whether your loan is secured by a collateral charge.
  • If you switch before maturity, it is no longer a renewal: a penalty applies.

A mortgage broker compares offers from several lenders for your renewal.

Frequently asked questions

Do I have to pass the stress test again if I switch lenders at renewal?

Not if your uninsured mortgage moves from one federally regulated lender to another with no increase in the amount or the amortization: OSFI has not prescribed the minimum qualifying rate for these since November 21, 2024. Insured mortgages have been exempt since December 2023. If you add money or extend the amortization, the test applies.

When should I receive my renewal statement?

If your lender is federally regulated, such as a bank, at least 21 days before the end of the term.

Who pays the costs of switching lenders?

In principle you do, but FCAC suggests asking the new lender whether it will pay some or all of them. Costs can include discharge, registration, transfer or assignment, appraisal and administration.

Can I switch lenders before maturity?

Yes, but it is no longer a renewal: breaking the contract usually triggers a penalty, the higher of three months' interest or the interest rate differential.

Sources

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Updated

General information, not financial advice. For your situation, consult a mortgage broker or your institution.