Plan mortgage prepayments around renewal

Use the renewal statement as a starting point

For mortgages with federally regulated institutions, FCAC says the lender must provide a renewal statement at least 21 days before term end. It includes the balance, rate, frequency, term and applicable charges. The offered rate should not automatically be treated as the best available option.

Review the budget, expected prepayments and desired flexibility. A lower regular payment obtained by extending amortization can increase long-run interest, while a higher payment may be difficult to reverse.

Example: model the renewal balance first

A borrower has eight months left in the term and considers monthly prepayments. They estimate the balance at renewal under zero extra and the affordable plan. That projected balance becomes the starting point for comparing real renewal and switching offers.

They ask whether a planned lump sum should be made before the term ends, exactly at maturity or after the new term begins. The lender confirms which date is penalty-free and how the transaction will be recorded.

Renewal preparation sequence

1. Record the term end date and current prepayment privilege.
2. Estimate the balance at renewal under realistic payment plans.
3. Review budget, rate risk and desired payment frequency.
4. Compare the current lender’s offer with other eligible options.
5. Include legal, appraisal, discharge and incentive costs when switching.
6. Confirm lump-sum timing before signing the next contract.

Avoid passive renewal

FCAC warns that renewal can be automatic if the borrower takes no action. Review the offered rate, term and privileges rather than allowing convenience to decide. Qualification, property value and switching costs can still limit alternatives.

• Do not assume the current rate continues.
• Ask whether regular-payment increases reset under the new term.
• Compare remaining amortization after each offer.
• Keep written evidence of penalty-free payment timing.
• Contact the lender early if the renewal payment may be unaffordable.

Use a calculator as a scenario, not a promise

Use the term fields to show where the current rate stops being contractual. Build the balance-to-renewal scenario first, then rerun with the actual new rate, payment and amortization instead of extending the old rate automatically.

The Canadian model converts the quoted nominal annual rate using semi-annual compounding, then derives the payment-period rate. It distinguishes standard from accelerated schedules and keeps the mortgage term separate from the remaining amortization.

The estimate holds the entered rate constant, assumes extras reach principal and cannot discover a lender’s privilege or penalty method. Compare its regular payment with your statement, and rerun at renewal or after a variable-rate change.

Review the plan before money leaves

Compare the proposed prepayment with a zero-extra case and an interrupted plan using identical dates and rate assumptions. Record the current term end even when the schedule spans the remaining amortization, because the contractual rate and privileges can change at renewal.

Keep the agreement, annual statement and lender response that states the available privilege in dollars. If the mortgage has several segments, review each rate, maturity and penalty separately rather than treating one combined balance as a single contract.

• Protect the required payment and essential household costs.
• Keep emergency and known near-term cash accessible.
• Confirm payment-increase and lump-sum privileges separately.
• Reconcile the first prepayment with the lender statement.
• Rerun at renewal, after a variable-rate move or after any contract change.