What happens if your mortgage auto-renews? Renewal statements and your rights

If you do nothing at the end of your mortgage term, what happens depends on your lender and your mortgage contract. Some lenders renew automatically into a term set in the contract or the renewal statement, sometimes at a posted rate rather than a discounted one, and some convert the balance to an open or short-term mortgage. Federally regulated banks must send you a renewal statement at least 21 days before the term ends, setting out the new terms, and must give similar notice if they do not intend to renew. The safest approach is to treat the renewal statement as an offer that needs your decision, and respond in writing before the deadline it gives.

This guide is part of the mortgage renewal mistakes guide. Figures are illustrative.

What the renewal statement should tell you

For federally regulated banks, the federal cost-of-borrowing rules under the Bank Act set out what a renewal statement must disclose. Expect to see, in some form:

Credit unions and caisses follow provincial rules, which may set different timing and content. Read the whole statement, not just the rate.

The cost of a passive renewal

Illustrative: $400,000 balance, 20 years left. The lender's best discounted one-year rate is 4.39%, but an automatic renewal applies a posted rate of 6.09%.

One year at the posted rate costs about $6,618 more interest and leaves the balance higher. Not every lender renews at a posted rate, but the example shows why the default matters.

If this has already happened, ask your lender straight away whether you can renegotiate. If the automatic term is closed, breaking it may cost a penalty, so ask how that would be calculated; short open or convertible terms are cheaper to change.

Timeline that avoids an automatic renewal

1. Six months before: note the maturity date and check your contract for what happens if you do nothing.
2. Four months before: collect outside offers and a rate hold. See the renewal checklist.
3. When the statement arrives: note the response deadline; compare with your outside offers in the renew-vs-switch calculator.
4. At least three to four weeks before maturity: sign the renewal you want, or instruct the new lender and lawyer or notary to switch.
5. After maturity: check the first statement shows the term and rate you chose.

If your lender will not renew

A lender can decide not to renew a mortgage at the end of the term, for example after missed payments, a change in the property, or if it is leaving a type of lending. A federally regulated bank must give notice before the term ends. If this happens:

• Ask the lender for the reason and for any alternatives it can offer.
• Contact other lenders or a licensed mortgage broker immediately. With arrears or credit problems, options may be limited to higher-cost lenders.
• Ask whether the lender will extend the term briefly while you arrange refinancing.
• Consider advice from a lawyer (a notary in Quebec) or a non-profit credit counselling service.
• If the lender is a bank and you believe the notice or process broke the rules, see complaints to your lender and OBSI.

Private lenders, which are common for short-term second mortgages, often have one-year terms, renewal fees and no obligation to renew. Read their terms with particular care.

Common misunderstandings

• "The statement will arrive months in advance." The federal minimum for banks is 21 days, although many lenders write earlier. Do not wait for it.
• "Doing nothing keeps my current rate." The old rate ends with the term.
• "Auto-renewal is always at a bad rate." Some lenders auto-renew at reasonable terms. The point is that you have not chosen them.
• "Once auto-renewed, I'm stuck." Not always. Ask what the lender can change and what any penalty would be.

Checklist when the statement arrives

• Rate, term, rate type and compounding
• Payment and amortization
• Prepayment privileges and penalty method
• Any renewal or administration fee
• Response deadline and what happens if you do not respond
• Whether the offer can be improved; ask with written outside offers
• How to accept: online, in branch or by signed document

If you decide to switch rather than renew, check the cost of moving a collateral charge in collateral charges and switching costs, and verify the rules yourself with the bodies listed in official sources.

Frequently asked questions

Do I have to sign anything to renew?

Usually you accept the renewal by signing or confirming online. Some contracts allow automatic renewal without a signature, which is why reading the statement matters.

Can I renew for a different term from the one on the statement?

Yes, in most cases. Ask your lender for the terms and rates of other products, and for an updated statement.

What if I am in the middle of selling?

Ask for a short open term or an open mortgage until closing, so you avoid a penalty when the sale completes.

Does a credit union have to send a renewal statement?

Provincial rules apply. Most credit unions send one, but timing and content may differ. Check with your credit union and provincial regulator.

Sources

• Financial Consumer Agency of Canada — renewal statements and your rights with banks
• Justice Laws Website — the Bank Act and cost of borrowing rules
• Financial Services Regulatory Authority of Ontario — Ontario credit unions and mortgage brokers
• Ombudsman for Banking Services and Investments — disputes with banks