Why the renewal offer usually isn't the best one
Your existing lender's renewal letter is priced to keep you with minimal effort on their part — it's rarely their sharpest rate. Lenders know that renewal is a moment of inertia: you're busy, the paperwork is simple if you just sign and return it, and most people do exactly that without shopping around. Getting a competing quote costs nothing and takes a few minutes, and since late 2024, switching an uninsured mortgage to a new lender no longer requires passing the stress test, which used to be the biggest practical hassle standing in the way. If you do switch, ask the new lender about covering your legal and switch fees — many do as an incentive to win your business, which can make switching effectively free even before counting the rate savings.
What "renewal" actually means, legally
Renewal happens at the natural end of your mortgage term — the fixed period (commonly 1 to 5 years) you originally locked a rate in for, which is different from your amortization (the total 20-30 year schedule your payments are calculated against). At renewal, no break penalty applies, because you're not leaving early — your commitment to that term is simply over, and you're free to renew with your current lender, switch to a new one, or pay the mortgage off entirely if you're in a position to. This is fundamentally different from breaking a mortgage mid-term, which does trigger a penalty (see the mortgage penalty calculator if that's your situation instead).
What to actually compare, beyond just the headline rate
A lower rate is the obvious thing to compare, but term length matters too — a shorter term at a lower rate carries more renewal risk if rates rise before your next renewal, while a longer term at a slightly higher rate offers more payment certainty. Also worth checking: prepayment privileges (how much extra you're allowed to pay down each year without penalty), portability (whether the mortgage can move with you if you sell and buy again before the term ends), and whether the new lender's penalty structure looks reasonable in case you need to break early down the road. The rate matters most, but it's rarely the only thing worth comparing.
Thinking about changing more than just the rate — like pulling out equity, consolidating other debt, or extending your amortization back out to lower your payment? That's a refinance, not a renewal, and it works differently, including potentially involving the stress test and a break penalty if you do it mid-term. See the refinance calculator instead.