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Early renewal is signing a new mortgage term before the current one matures, usually to lock in a rate ahead of an expected increase or to restructure the mortgage sooner than the contract requires. Because the existing term hasn’t ended, most lenders charge a prepayment penalty to break the old contract unless it is waived or blended into the new rate.
Early renewal means signing a new term before the current one matures — often to lock in a rate a borrower expects to rise, or simply to restructure sooner than the contract technically allows. Because the existing term hasn’t ended, the lender is still owed something for breaking it early.
That something is usually a prepayment penalty, calculated differently depending on whether the mortgage is fixed or variable. Some lenders will offer to blend and extend instead of charging the penalty outright, folding the cost into a new blended rate.
Whether early renewal is worth it comes down to the math: the penalty cost, compared against the value of locking in a rate now versus waiting for the actual renewal date.
Penalty risk: breaking a closed mortgage term early can trigger a prepayment penalty, calculated differently for fixed- and variable-rate mortgages.
Blend and extend avoids paying it upfront: many lenders offer to blend and extend instead — folding the penalty cost into a new blended rate rather than charging it as a lump sum.
Interest Act protection after five years: for a mortgage with an original term over five years, an individual borrower can prepay in full after the five-year mark with a penalty capped at three months’ interest, under section 10 of the federal Interest Act.
Who evaluates it: mortgage agents (Ontario, FSRA), submortgage brokers (BC, BCFSA), mortgage associates (Alberta, RECA), and courtiers hypothécaires (Quebec, AMF) run the penalty-versus-savings math before recommending an early renewal.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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