Right to Shop for Mortgage Rates at Renewal Without Penalty

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In Canada, every mortgage borrower has the fundamental right to shop for rates and switch lenders at term renewal without any penalty. This right, often unknown or underutilized, is one of the most powerful levers borrowers have for obtaining favorable conditions. As the term maturity approaches (typically 30 to 120 days before), the current lender sends a renewal notice proposing a new rate. Too often, borrowers sign this offer without comparing it to the market, accepting a rate that may be higher than what they could obtain elsewhere. The transfer process to a new lender is relatively straightforward when the mortgage is registered as a conventional charge: it is a simple switch that does not incur discharge fees. For a collateral mortgage, the transfer requires a discharge and new registration with notary fees, but these costs are often absorbed by the new lender. Mortgage portability also allows you to transfer your current loan conditions to a new property if you move during the term. In Quebec, AMF-certified mortgage brokers play an essential role in this process by comparing offers from multiple lenders and negotiating the best conditions. The Act respecting the distribution of financial products and services (LDPSF) requires the broker to act in the client's best interest, including at renewal time.

The Right to Shop at Renewal: Your Best Negotiating Lever

Mortgage renewal is a pivotal moment in the life of your loan. It is the only opportunity where you can switch lenders, renegotiate your rate, and adjust your mortgage conditions without incurring a prepayment penalty. Yet a surprising number of borrowers sign their current lender's renewal offer without comparing it to the market, potentially leaving thousands of dollars on the table.

What the Law Says

In Canada, the legal framework is clear: at mortgage term maturity, the borrower is not bound to any lender. The Bank Act, for federally regulated institutions, and the Civil Code of Quebec (CCQ) for contractual matters, guarantee this freedom. The renewal notice you receive from your current lender is an offer, not an obligation. You have the right to decline it and seek better conditions elsewhere, whether from another bank, a caisse populaire, or a monoline lender.

How to Shop Effectively for Your Renewal

Mark your term maturity date: Enter this date in your calendar at least 120 days in advance. Most lenders offer rate holds of 90 to 120 days, allowing you to lock in a favorable rate while continuing to shop.
Contact your mortgage broker: An AMF-certified broker has access to dozens of lenders and can obtain rates not available directly at the counter. They will compare offers considering not only the rate but also prepayment privileges, portability conditions, and charge type (conventional or collateral).
Obtain competing offers: Ask your broker to present at least three offers from different lenders. Use these offers as leverage to negotiate with your current lender. Studies show that a simple negotiation call can reduce the offered rate by 0.10% to 0.30%.
Evaluate the total cost of transfer: If your mortgage is conventional, the transfer is typically free. If it is collateral, ask the new lender if they absorb discharge and re-registration fees. Compare transfer costs against interest savings over the new term.

Mortgage Portability

Mortgage portability

Frequently Asked Questions

When should I start shopping for my mortgage renewal?

Ideally, begin 120 days (4 months) before your term maturity. Most lenders allow you to lock in a rate 90 to 120 days in advance. This gives you time to compare market offers and negotiate with your current lender. Contact your mortgage broker upon receiving the renewal notice, or even before.

Can my current lender refuse to let me leave at renewal?

No. At term maturity, you are free to leave your lender without any penalty. The lender cannot prevent you from transferring your mortgage elsewhere. This is a fundamental borrower right in Canada, whether your loan is under fédéral (Bank Act) or provincial regulation.

Does transferring to a new lender involve fees?

For a conventional mortgage, the transfer (assignment) is generally free or low-cost, and fees are often absorbed by the new lender. For a collateral mortgage, a discharge and new registration are required, with notary fees of $1,000 to $2,000. Ask the new lender if they offer reimbursement of these fees.

What is mortgage portability?

Portability allows you to transfer your current mortgage (with its rate and conditions) to a new property if you move during the term. This avoids the prepayment penalty. Portability conditions vary by lender, and a limited timeframe (often 90 days) is given to complete the transfer.

Do I need to requalify to switch lenders at renewal?

Yes, in most cases. The new lender will require a creditworthiness assessment, including your credit score, income, and the OSFI stress test. If your financial situation has deteriorated since obtaining the original loan, requalification could be challenging. A mortgage broker can help you prepare your application.