When a lender offers you an early mortgage renewal (often 4–6 months before your term ends), they mean switching to the new rate immediately. In Canada, big banks let you renew up to 120–180 days early with no penalty. That sounds convenient, but beware: if your current rate is lower than today’s, jumping early will end your cheap rate right away. An early renewal offer usually comes with an expiry date to pressure you. Taking it means paying the higher new rate sooner, making the bank more profit and costing you thousands.
What Is an Early Renewal?
An early renewal is when you agree to your lender’s new rate before your current term officially. The banks will often send these renewal offers with a deadline(typically 1-2 weeks), months before the renewal date. As an example, RBC and BMO let you renew up to 180 days early, TD and most credit unions about 120–150 days.
You should know that when you renew early, the new rate kicks in right away. In practice, that means losing whatever benefit you’d get from staying at your old rate for a few more months. Many brokers advise instead to simply lock in a current rate (via a 120 day rate hold) and continue paying your existing low rate until renewal. If rates rise in the meantime, you’ve locked in protection; if they fall, lenders will often sweeten your deal later (so you avoid any last-minute pressure).
Why Early Renewal Often Backfires
If you locked in a pandemic low mortgage rate (say 1.8%) and today’s rates are around 3.99%, renewing early is usually a mistake. You’d be giving up months of ultra-cheap payments for expensive new ones. This is the trap a lot of people fall into: you locked in a super low rate a few years ago, but the bank is encouraging you to ‘renew early’ into something worse. In that case, you’re giving up months of low payments just to get into higher ones sooner. In short, taking an early renewal here just sends more money to the bank immediately, and has you lose money on your mortgage.
The best option when up for renewal is to shop around and secure a rate hold if you’re coming off a lower rate. A rate hold (often 120 days) locks today’s rate for you so that you can wait until your term ends before activating it. This way, you stay on your low 1.8% payment until renewal, rather than jumping to that 3.99% 4-6 months early.
Rate Holds: Holding on to Your Low Rate
A rate hold (sometimes called a mortgage rate lock) is a tool brokers and banks offer to secure a quoted rate for a set period before renewal. For example, many lenders let you lock today’s rate for up to 120 days. This means even if rates climb, you keep the lower quote when your term ends. With a rate hold, you enjoy your existing low interest rate until your renewal date, and only switch to the new rate at renewal.
Beyond the numbers, rate holds give you breathing room. They protect against rising rates and avoid the “take it or leave it” pressure of a fast-expiring offer from your lender. If rates fall during the hold, lenders often honor a better rate at renewal.
When Early Renewal Makes Sense
There is one scenario where an early renewal can pay off; if your current rate is higher than today’s rates. As an example, lets say you took a 3-year fixed at 5.8% in 2023 and now the market is around 3.99%. In this case locking in early means jumping to a lower payment immediately.
In simpler terms, if you are at 5.8% now, switching to 3.99% 4–6 months early immediately cuts your monthly payment and saves you interest 4-6 months earlier than waiting till your renewal date. As the numbers show (see below), you’d save hundreds per month and thousands in interest by renewing early in this case. In this case, the early renewal option makes sense if you’re paying a much higher rate than the one offered now.
Crunching the Numbers: Two Examples
- Low-rate scenario (1.8% → 3.99%): Say you have a $500,000 fixed mortgage on a 30-year amortization at 1.8%. Your monthly payment is roughly $1,800. Switching early to 3.99% would jump your payment to about $2,384 – an increase of ~$584 per month. If you renewed 4 months early, you’d pay roughly $2,344 more in total payments over those months, and about $3,650 more in interest (with about $1,300 less principal paid down). In plain terms, an early renewal here costs you thousands of dollars that you’d otherwise save by sticking with 1.8%.
- High-rate scenario (5.8% → 3.99%): Now lets assume that you are at 5.8% on that same $500K loan. The monthly payment at 5.8% is about $2,934. An early switch to 3.99% drops it to ~$2,384, saving roughly $550 each month. Over 4 months, that’s about $2,200 saved in total payments and around $3,036 saved in interest (since more of your payment goes to principal). You’d even pay roughly $818 more principal in those months. In other words, by renewing early you pocket a couple thousand dollars (and increase equity) before your term even ends. This is exactly the win early renewal is meant to capture when rates fall.
These examples underline the trade-off: If your existing rate is lower than current offers, waiting is almost always cheaper; if it’s higher, acting early can save you interest.
The Bottom Line
Early renewal isn’t inherently evil, but it’s often a bad deal if your existing rate is lower than today’s market. Taking an early renewal that’s the exact same rate you could lock with a rate-hold only serves to cut your cheap rate term short. Instead, you should get a rate hold or wait it out so you enjoy every last month of your low mortgage rate. Only if your rate is above current offers (like 5.8% vs 3.99%) does early renewal make sense, because then you genuinely save interest by locking in the lower rate.
