Switch Mortgage Lenders at Renewal? The Break-Even Math in Canada
Renewal is the one point in a mortgage when you can move to another lender without a prepayment penalty. Whether the move pays comes down to three numbers: the rate gap, your balance and what the switch costs you.
- Rules checked October 29, 2026
- By H Paul
- 8 min read
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This guide works those numbers through for a hypothetical $400,000 renewal and shows the smallest rate gap that covers typical switching costs.
The short answer
Switching usually pays if the new rate is at least 0.10 to 0.20 percentage points lower and your costs stay under about $2,000 on a balance of $400,000 or more. In our hypothetical example, a rate 0.40 points lower saves $7,471 in interest over a five-year term.
The math gets tight when your balance is small, the gap is tiny, or you pay legal and appraisal fees yourself. Ask your current lender to match the better offer first. If it does, you get the saving with no switching costs at all.
Why the renewal offer deserves a second look
A Bank of Canada staff analysis from July 2025 estimated that about 60% of outstanding mortgages would renew in 2025 or 2026, and that about 60% of those borrowers would see a payment increase. On October 28, 2026, the Bank raised its policy rate to 2.5%. We cover that decision in our Bank of Canada rate hike explainer.
The first offer in your renewal letter is not always your lender’s best one. A rate that is a few tenths of a point lower elsewhere can be worth thousands of dollars, and it gives you leverage to ask your lender to do better.
What a lower rate saves over a five-year term
Here is the worked example. You have $400,000 left to pay and 20 years remaining on your amortization. Your lender offers a five-year fixed rate of 4.49%. Another lender offers 4.09%, which is 0.40 percentage points lower. Both rates are hypothetical.
- At 4.49%, your monthly payment is $2,519.51.
- At 4.09%, it is $2,435.65, which is $83.86 less each month.
- Over 60 payments, that is $5,032 less paid out of your bank account.
- You also owe $2,440 less when the term ends, because more of each payment went to principal.
Add those together and the lower rate saves $7,471 in interest over the five years. The table shows how the saving scales with the rate gap and your balance.
| How much lower the new rate is | $200,000 balance | $400,000 balance | $600,000 balance |
|---|---|---|---|
| 0.10 point | $935 | $1,871 | $2,806 |
| 0.25 point | $2,337 | $4,673 | $7,010 |
| 0.40 point | $3,736 | $7,471 | $11,207 |
| 0.50 point | $4,667 | $9,334 | $14,001 |
Hypothetical example. Starting rate 4.49%, 20 years of amortization left, monthly payments, five-year term. Interest is compounded semi-annually, the usual method for Canadian fixed-rate mortgages.
A simple rule of thumb comes out of these numbers. Every 0.10 point of rate difference is worth about $468 over five years for each $100,000 you owe.
What switching lenders can cost
The Financial Consumer Agency of Canada (FCAC) lists the costs you may face when you move a mortgage: discharge, registration, transfer or assignment fees from your current lender, an appraisal fee if the new lender needs to confirm your home’s value, and other administration fees. You may also need a lawyer or notary to sign registration documents.
| Cost | Typical amount | Where the figure comes from |
|---|---|---|
| Discharge fee, where not regulated | $0 to $400 | FCAC range |
| Lawyer, notary or commissioner | $400 to $2,500 | FCAC range |
| Appraisal | $200 to $500 | One bank’s fee schedule |
| Assignment or transfer fee | $0 to $395 | Same bank, varies by province |
Amounts are examples, not a quote. Some provinces cap discharge fees. The appraisal and transfer figures come from the RFA Bank of Canada prime fee schedule dated January 2025.
The FCAC suggests asking whether the new lender will cover some or all of these costs. If the new lender pays the legal and appraisal fees, your own cost can drop to little more than the discharge fee. Get that promise in writing before you commit.
The break-even rate gap
Flip the question around. Given what the switch costs you, how much lower does the new rate need to be just to break even over five years? This table answers that for three balances.
| Your switching cost | $200,000 balance | $400,000 balance | $600,000 balance |
|---|---|---|---|
| $1,000 | 0.11 point | 0.05 point | 0.04 point |
| $2,000 | 0.21 point | 0.11 point | 0.07 point |
| $3,000 | 0.32 point | 0.16 point | 0.11 point |
Hypothetical example using the same assumptions as the first table. A gap below the figure shown means the switch costs more than it saves over the term.
For a quick estimate, divide your switching cost by $4,680 times your balance in hundreds of thousands. A $2,000 cost on a $400,000 balance works out to 2,000 divided by 18,720, or about 0.11 point.
Rolling costs into the loan is not free either. In our example, adding $3,000 to a $400,000 balance at 4.09% adds about $556 of interest over five years, and you still owe $2,460 of that $3,000 at the end of the term.
Rules that make switching easier now
No stress test for a straight switch
For uninsured mortgages at federally regulated lenders, the minimum qualifying rate is the greater of your contract rate plus 2% or 5.25%. Since November 21, 2024, the Office of the Superintendent of Financial Institutions (OSFI) no longer prescribes that rate for an uninsured straight switch.
A straight switch means you move to another federally regulated lender with no increase in your loan amount or remaining amortization. OSFI allows the balance to rise by up to $3,000 for transaction costs, but no equity take-out. The new lender still has to approve you under its own underwriting, and the FCAC notes it may use different criteria than your current lender. If your mortgage is insured, ask the new lender which rules apply to you.
Your renewal statement comes at least 21 days ahead
If your mortgage is with a federally regulated lender such as a bank, it must send a renewal statement at least 21 days before your term ends. The statement must show your balance at renewal, the rate, the payment frequency, the term and any fees. It must also say whether the lender plans to renew automatically.
Three weeks is not much time to apply, get approved and arrange legal work. The FCAC suggests starting to shop a few months before your term ends. Credit unions are provincially regulated, so check your own contract for their notice rules.
Hidden costs that can wipe out the saving
Check these before you sign with a new lender.
- A collateral chargeTo remove it, the FCAC says you must repay or transfer every loan it secures, such as a line of credit or car loan.
- A new insurance premiumIf your mortgage is insured and you increase the loan or extend the amortization, you may owe a new premium.
- A longer amortizationIt lowers the payment but is no longer a straight switch, so the minimum qualifying rate can apply again.
- Moving before the term endsA switch before maturity can trigger a prepayment penalty larger than the rate saving.
If you are thinking of leaving mid-term, read how lenders work out the mortgage prepayment penalty before you compare rates.
How to decide in five steps
- Note your renewal date and balance. Use the balance on your renewal statement and confirm your remaining amortization with your lender.
- Get two or three written offers. Ask each lender for the rate, the term, how long the rate is held and which switching costs it will pay.
- Add up what you would pay. Include discharge, legal, appraisal and transfer fees that the new lender will not cover.
- Check the gap against the break-even table. Use the rule of about $468 per 0.10 point per $100,000 over five years, or run your numbers through our mortgage payment calculator.
- Ask your lender to match. Show your current lender the best written offer. If it matches, you keep the saving and skip the paperwork.
Frequently asked questions
Do you pay a penalty to switch mortgage lenders at renewal?
Not a prepayment penalty, as long as you move when your term ends. The FCAC says a penalty may apply if you pay off a mortgage before the end of the term. You may still pay discharge, legal, appraisal or transfer fees unless the new lender covers them.
Do you have to pass the stress test to switch lenders at renewal?
Not for an uninsured straight switch between federally regulated lenders. Since November 21, 2024, OSFI no longer prescribes the minimum qualifying rate when the loan amount and amortization do not increase. The new lender still has to approve you under its own underwriting.
How much lower does a rate need to be to make switching worth it?
It depends on your balance and costs. In our hypothetical five-year example, a $400,000 balance needs a rate about 0.11 percentage points lower to cover $2,000 of switching costs. A $200,000 balance needs about 0.21 points to cover the same cost.
When will my lender send my renewal offer?
A federally regulated lender, such as a bank, must send a renewal statement at least 21 days before your term ends. The FCAC suggests you start shopping a few months before that.
What happens if I ignore my renewal letter?
Your mortgage may renew automatically, and the FCAC warns you may not get the best rate or conditions. If your lender plans to renew automatically, the renewal statement must say so.
Can I add switching costs to my mortgage balance?
Under OSFI’s straight switch rule, the balance can rise by up to $3,000 to cover transaction costs without losing the exemption. In our example, rolling $3,000 into a $400,000 balance at 4.09% adds about $556 of interest over five years.
- Sources, checked October 29, 2026: FCAC: Renewing your mortgage (modified 2025-10-15); FCAC: Discharging a mortgage (modified 2025-09-25); OSFI: Exemption of uninsured mortgage straight switches from the MQR (November 21, 2024); OSFI: Minimum qualifying rate for uninsured mortgages (modified 2026-01-29); Bank of Canada Staff Analytical Note 2025-21 (July 2025); Bank of Canada rate announcement (October 28, 2026); Interest Act, section 6 (current to 2026-09-30); RFA Bank of Canada prime fee schedule (January 2025).
- Method: Payments, interest and balances were calculated in Python with monthly payments and semi-annual compounding, then checked against the closed-form amortization formula. Break-even gaps were solved by bisection. All rates are hypothetical.
Important: This guide is general information, not financial or legal advice. Rates, fees and approval rules vary by lender and province, and credit unions follow provincial rules. Gizly is not paid by any lender mentioned here. See our affiliate disclosure.
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