If the term for your existing mortgage is coming to an end and hasn’t yet been paid off, you might be wondering whether to renew or refinance your loan. Knowing the differences between these two options can help you understand which one might be right for your unique financial situation.

What is a mortgage renewal?

Renewing your mortgage is the process of extending your mortgage agreement for another term at the end of your current term with the same lender. If you’re satisfied with your existing mortgage, then renewing your mortgage is a hassle-free option to consider in order to keep your current mortgage balance and amortization period. Just keep in mind that your mortgage rate will change on renewal based on prevailing rates.

What is a mortgage refinance?

Refinancing a mortgage is the process of replacing your current mortgage with a new one with a new set of terms, which can include significant changes to the mortgage type, principal amount, amortization period and payment schedule. Typically, this would involve paying off your existing mortgage balance with the new mortgage.

Since refinancing requires you to apply for a new mortgage, it can also give you access to a portion of your home’s equity – which the Financial Consumer Agency of Canada (FCAC) says is the difference between the value of your home and the outstanding balance on your mortgage. Depending on your financial goals, you can use your equity for different purposes. For example, you can use your equity to pay for home renovations home or consolidate your debt.  

Additionally, since you will be discharging your mortgage to register a new one, you will need to engage the services of a lawyer or solicitor to finalize the transaction.

What should I consider when deciding between these two options?

If you are deciding between renewing or refinancing your mortgage, it’s important to consider your financial circumstances and goals.

To help you decide on the right option, here are some questions to ask yourself:

• Are you happy to continue working with your current lender?
• Do you want to change the terms of your mortgage?
• Do you have equity in your home that you want to access?

How can a mortgage broker help you choose the best option for your situation?

One professional who can help find the best solution when your mortgage term is coming to an end is a mortgage broker. Mortgage brokers are well-acquainted with the details of both the renewal and refinancing process, so they will be able to break down the complexities in a way that is easy to understand.

When you’re ready, contact a mortgage broker and ask them about your options, including solutions from Home Trust. Learn more about our mortgage offerings by visiting hometrust.ca/mortgages.

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