Renewal, switch and refinance get used loosely in conversation but mean specific, different things underwriting-wise. A renewal keeps the mortgage with the same lender at maturity, typically with minimal new underwriting. A switch (or transfer) moves an existing mortgage to a new lender at maturity with no increase in the loan amount and no extension of the remaining amortization — this is the straight-switch scenario covered in the debt-servicing module, and it can happen without the borrower ever taking on new money. A refinance is different in kind, not just degree: it involves taking on additional funds, extending the amortization, or otherwise altering the terms beyond a straight like-for-like move, and it is always uninsurable under Canadian insurance rules regardless of the borrower's equity position, as covered in this course's earlier module on insurance categories.
Since 21 November 2024, a straight switch of an uninsured mortgage — same loan amount (plus up to $3,000 in allowed transaction costs), same remaining amortization, moving between federally regulated lenders — is exempt from OSFI's prescribed minimum qualifying rate. This is the practical reason switching has become meaningfully easier for borrowers who simply want a better rate at maturity without changing anything else about their mortgage; the moment new money or a longer amortization enters the picture, the transaction is no longer a straight switch and the exemption no longer applies.
Because a refinance is always uninsurable, it is bound by the same legal ceiling as any other uninsured mortgage in Canada: a maximum loan-to-value of 80%. A client hoping to refinance out most of their equity will hit this ceiling regardless of how much equity they actually have; access above 80% LTV is not available through a first-mortgage refinance and would need to be considered, if at all, through a separate secondary-financing structure with its own risk and cost profile.
Moving lenders at renewal costs differently depending on the existing charge type covered earlier in this course. A standard charge can often be assigned to a new lender without a full discharge, keeping legal costs low or, in many competitive switch offers, covered by the new lender entirely. A collateral charge requires a full discharge of the old charge and new registration with the new lender, with legal fees the client should be told about upfront rather than discovering at the eleventh hour. This is one more reason the charge-type conversation at origination has consequences years later.
Engaging with a renewing client roughly 90 to 120 days before their maturity date, rather than waiting for the current lender's renewal letter to arrive, gives enough time to properly compare a straight switch against staying put — including rate-hold windows most lenders offer for new commitments. A client who waits until the last few weeks and simply signs whatever their existing lender proposes may be leaving a materially better rate or structure on the table purely for lack of runway, not because the current lender's offer was actually competitive.
A client wants to move to a new lender at renewal, increase their loan amount by $40,000 to fund a renovation, and keep the same amortization. What kind of transaction is this?
Adding $40,000 in new money makes this a refinance, not a straight switch, even though the amortization is unchanged and even though it happens to coincide with the renewal date — the defining feature of a straight switch is no increase in loan amount beyond the small allowed transaction-cost buffer. As a refinance it is uninsurable and capped at 80% LTV, and it does not qualify for the straight-switch MQR exemption, which applies only to like-for-like moves with no new money.
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