Mortgage Renewal 2026: How to Avoid Payment Shock and When to Switch Lenders

Key Takeaways

• About 60% of Canadian mortgages are up for renewal in 2025 or 2026, according to the Bank of Canada. Buyers from 2020-2021 face the biggest payment shock.
• Since November 2024, OSFI removed the stress test for straight switches of uninsured mortgages. You can now shop freely between lenders at renewal.
• Example: on a $400,000 mortgage at 1.89%, renewing at 4.49% in 2026 adds roughly $443 per month.
• Start shopping 120 days before your term ends. The rate on your lender’s renewal letter is almost never their best offer.
• Switching isn’t always worth it: small balance, collateral charge mortgage, IRD penalty, or portability clause can tip the math the other way.

If you bought your home between 2020 and 2022, your renewal letter is going to hit differently. The rate you locked in (1.89%, 2.14%, 2.49%) doesn’t exist anymore. And what your lender is offering for the next five years is, in most cases, roughly double what you’ve been paying.

You’re not alone. The Bank of Canada estimates that about 60% of all outstanding mortgages in the country are coming up for renewal in 2025 or 2026. CMHC calls it a “wave” of more than 1.5 million households that have already renewed at higher rates, with about a million more on the way.

I’m Alexandra L. St-Germain. I’m a mortgage broker (AMF #209476) on Montreal’s South Shore. I’ve been in the mortgage industry since 2016, and I spent several years working in banking (BMO, National Bank) before becoming an independent broker. Here’s what I tell my clients when their renewal letter arrives in 2026, and how to avoid payment shock, whether you decide to stay or switch lenders.

Why 2026 Is the Year of Payment Shock in Canada

About 60% of mortgages currently outstanding in Canada are set to renew in 2025 or 2026, according to a Bank of Canada staff analytical note published in July 2025. It’s a historic peak. The vast majority of these borrowers signed between 2020 and 2022 at rates between 1.49% and 2.99%, and they’re now renewing at rates roughly twice as high.

On the CMHC side, the Housing Observer report from February 2026 puts numbers to the wave: more than 1.5 million Canadian households have already renewed at a higher rate, and about 1 million more will do so in the next 12 months. The most exposed group is 2020-2021 first-time buyers. It’s their first real renewal, and it’s almost always the hardest.

The good news is that the rate environment has partially softened. The Bank of Canada held its overnight rate at 2.25% in the March 18, 2026 decision, after a long series of cuts. Five-year fixed rates at major institutions now sit around 4.4% to 4.7%, compared to peaks of 5.5% to 6% in 2023-2024. If you’re renewing in 2026 rather than 2024, your timing in the cycle is better.

But let’s be clear. Going from 1.89% to 4.5%, even a “good” new rate stings. The real question isn’t whether it’ll cost more. It’s how much more, and how you limit the impact.

For my clients in Brossard, Longueuil, and Saint-Lambert, I always start by running the numbers.

How Much Will YOUR Renewal Cost: Real Payment-Shock Numbers

On a $400,000 mortgage taken out in 2021 at 1.89% (25-year amortization), the original monthly payment was about $1,672. After five years, the remaining balance is roughly $335,000. If you renew in 2026 at 4.49% over the remaining 20 years, your new monthly payment jumps to about $2,115. That’s an increase of roughly $443 per month, or $5,316 per year.

To run the exact calculation for your file, use the FCAC mortgage calculator (Financial Consumer Agency of Canada). Enter your current balance, remaining amortization, and the rate you’ve been offered. It’s the most neutral tool I know. Here are three scenarios that cover most of my South Shore files:

Balance at renewal	Payment at 1.89% (20 yrs left)	Payment at 4.49% (20 yrs left)	Monthly increase	Annual increase
$250,000	$1,252	$1,579	+$327	+$3,924
$335,000	$1,678	$2,115	+$443	+$5,316
$425,000	$2,128	$2,683	+$555	+$6,660

Approximate calculations for illustration. Verify with the FCAC calculator.

That’s what CMHC calls “payment shock.” And here’s the statistic that worries me: according to the CMHC Housing Observer, the most common strategy borrowers are using to absorb the shock is simply extending their amortization. It lowers the monthly payment, yes. But it also stretches out how long you’ll be paying interest, and it can cost tens of thousands of dollars more over the life of the loan.

Before you extend your amortization, check whether you can get a better rate first. That’s exactly what the next rule made much easier.

The Rule That Changes Everything: No More Stress Test to Switch Lenders

Since November 21, 2024, the Office of the Superintendent of Financial Institutions (OSFI) removed the stress test requirement for straight switches of uninsured mortgages. In practical terms, if you transfer your mortgage to a new federally regulated lender at renewal, without increasing the loan amount or extending the amortization, you no longer have to requalify at the contract rate + 2% or the 5.25% floor. This rule aligns with what already existed for insured mortgages.

Why this is huge. Before this rule, many homeowners were effectively trapped with their current lender. If their income had dropped, or their debts had increased, or qualification criteria had tightened since they bought, they couldn’t pass the stress test elsewhere. The result: they were forced to accept their bank’s offer, even if it was the worst deal on the market. That captive-borrower dynamic was the mortgage industry’s best-kept secret.

When I worked at National Bank and BMO, I saw this retention lever in action every day. Now, as an independent broker, I can finally tell my clients: yes, we can shop around. And yes, we’ll find something better in most cases.

A few important clarifications:

• “Straight switch” means: same loan amount, same remaining amortization. If you want to add a line of credit or increase your balance, that’s a refinance, not a straight switch. The stress test still applies.
• The rule targets federally regulated institutions (banks, some trust companies). In Quebec, Desjardins is not under OSFI but generally applies equivalent rules to stay competitive.
• Your basic qualifications (income, debt ratios, credit history) are still assessed by the new lender. This isn’t a blank cheque. It’s just the stress test threshold that disappears.

For most homeowners who’ve kept stable employment since they bought, this is the best mortgage news in years.

The 120-Day Playbook: When and How to Start Shopping

Start shopping for your renewal 120 days (about 4 months) before your term ends. That’s when most lenders send their renewal letter, and it’s the maximum window to lock in a rate elsewhere without penalty. At minimum, the FCAC (Financial Consumer Agency of Canada) requires federally regulated institutions to send a renewal notice at least 21 days before the term expires. But 21 days is too late to shop properly.

Banks typically send their letter 3 to 4 months in advance. That’s why I tell my clients: mark the date in your calendar 6 months out, and call me at 4 months. Here’s how those 120 days break down:

Period before term end	Action
120 to 90 days	Receive your lender’s renewal letter. Ask a broker for 2 or 3 competing offers.
90 to 60 days	Compare offers. Evaluate fees, portability, prepayment privileges, mortgage type (standard vs. collateral).
60 to 30 days	Negotiate with your current lender using the best offer as leverage. Decide: stay or switch.
30 to 0 days	If switching: the new lender handles the subrogation, notary, and appraisal if needed. Everything must close by your maturity date.

Here’s an industry secret. The rate on your lender’s renewal letter is almost never their best offer. It’s the default rate, the one that applies to clients who sign without asking questions. When you call with a competing offer in hand, the “better” rate appears like magic. In my experience, the gap between a lender’s first and second offer is often 0.3% to 0.7%. On a $350,000 balance, that can mean $5,000 to $12,000 in savings over a five-year term.

That’s also why getting a mortgage pre-approval elsewhere, even if you plan to stay, is almost always worth it. You show up at the negotiating table with a real number, not just an intention.

How Switching Lenders Actually Works in Quebec (Subrogation)

In Quebec, transferring your mortgage from one lender to another is called a subrogation. It’s different from a refinance. In a subrogation, you keep the same loan amount and the same property. You’re only changing who holds the mortgage. The new lender pays off the old one on your behalf and takes over as the mortgage creditor. It’s a standard process that wraps up in a few weeks, as long as you start early enough.

Here are the documents most lenders will ask for to open the file:

• Government-issued photo ID
• Recent pay stubs (or notice of assessment for self-employed borrowers)
• Employment confirmation (HR letter or contract)
• Current mortgage statement from your existing lender
• Municipal and school tax bill
• Property appraisal (sometimes required, sometimes not)

On the cost side, here’s what to expect and who typically pays:

Fee	Typical amount	Who usually pays?
Discharge of old mortgage	$250 to $400	Often covered by the new lender
Notary fees (subrogation deed)	$600 to $1,200	Often covered by the new lender
Property appraisal	$350 to $500	Often covered by the new lender
New lender admin fees	$0 to $250	Varies

The general rule: to win your file, many major lenders offer what’s called a “no-fee transfer program” that covers the discharge, notary, and appraisal. Ask for the full list before you sign. It’s negotiable, and it’s often what tips the balance between two offers at a similar rate.

One important note. According to the FCAC, if you have a collateral charge mortgage (common with certain lenders’ all-in-one products), the transfer is more complex. A collateral charge registers the mortgage for more than your actual balance, and all secured products (line of credit, car loan) tied to it must be discharged before you can switch. Check your mortgage type before you start shopping.

Renewal vs. Refinancing vs. Transfer: Don’t Mix Them Up

Three words that sound similar but mean very different things:

• Renewal. Your term expires, and you sign a new contract with the same lender. The loan amount and nature of the mortgage stay the same. This is the default path.
• Refinancing. You change your mortgage, usually to increase the amount (for debt consolidation, renovations, or buying another property). You go through the full qualification process again, including the stress test. It can happen at renewal, but it doesn’t have to.
• Transfer (subrogation). You switch lenders without changing the loan amount. This is the key tool for rate shopping at renewal, and it’s what benefits from the 2024 OSFI rule.

If you need to increase your mortgage or consolidate debts at the same time, that’s a refinance, not a straight switch. The stress test still applies. To understand which option fits your situation, see our pages on mortgage refinancing and debt consolidation.

When Switching Lenders at Renewal Is NOT the Right Move

Let’s be honest: switching lenders isn’t always the best decision. The fact that you can do it (thanks to the new OSFI rule) doesn’t mean it’s worth it in every case. Here are the situations where I recommend my clients stay with their current lender:

• Remaining balance under $100,000. The admin fees and paperwork often aren’t worth the rate difference. On $80,000, saving 0.2% works out to less than $1,000 over 5 years, and the hassle eats up half of that.
• You have a collateral charge mortgage. Some lenders, notably TD and certain all-in-one credit lines, register the mortgage for more than your actual balance. That makes it more complex and often more expensive to transfer, because you have to discharge the full registered amount.
• You want to break your term early. That’s a pre-term refinance, not a renewal. The IRD (interest rate differential) penalty that major banks calculate based on their posted rates can be massive and wipe out any potential savings. Check the penalty with your lender before you shop.
• You have a portability clause and a move planned. Some older mortgages can be ported to a new property without penalty. If you’re planning to sell within 12 to 24 months, keeping that portability may be worth more than a better 5-year rate.
• You’re in a hardship relief program. Under the FCAC’s guideline on mortgage loans in exceptional circumstances, federally regulated institutions must offer solutions (interest-only payments, amortization extensions, temporary deferrals) to borrowers in difficulty. If you’re in one of these programs, stay put until your situation stabilizes.

If you’re in one of these five situations, we can still optimize your renewal. We just do it by negotiating with your current lender instead of transferring.

You don’t have to switch to get a good renewal. You just have to shop.

Conclusion

The 2026 payment shock is real. For many of my South Shore clients, it’s the first time in five years they’ve seen their monthly payment go up. But it’s not inevitable. Three things to remember.

First, you have time. Start shopping 120 days before your term ends, not 21. Second, since November 2024, OSFI gave you back the power to shop freely between lenders. Use it. Third, switching isn’t always the answer. Sometimes the best strategy is to negotiate hard with your current lender, using a real competing offer as leverage.

Your bank already did their math. Make sure you’ve done yours.

If your term is coming up and you want an honest analysis of your file, I’d be happy to talk it through. It’s what I do, and it’s exactly why I left banking to become an independent mortgage renewal broker. No commitment, no pressure.

FAQ

Can I switch mortgage lenders at renewal without a penalty?

Yes. When your mortgage term ends, you are free to switch to any lender without paying a prepayment penalty. The only costs are the administrative fees for the transfer itself (discharge, notary, and possibly an appraisal), and many new lenders will cover some or all of these fees to win your business. You only face a penalty if you break your mortgage before the term is up.

Do I need to pass the stress test to switch lenders at renewal?

Not anymore for most borrowers. Since November 21, 2024, OSFI removed the stress test requirement for straight switches of uninsured mortgages. That means you can move your mortgage to a new lender without requalifying at the contract rate plus 2% or the 5.25% floor, as long as you keep the same loan amount and remaining amortization. Your income, debts, and credit are still assessed by the new lender.

How much will my mortgage payment increase at renewal in 2026?

It depends on your balance and your original rate. As a rough example, on a remaining balance of $335,000 originally at 1.89%, renewing at 4.49% with 20 years left would increase your monthly payment by about $443, or roughly $5,316 per year. Use the FCAC mortgage calculator to run your exact numbers.

When should I start shopping for mortgage renewal rates?

Start 120 days (about 4 months) before your term ends. That is the window most lenders allow you to lock in a rate without penalty. Your current lender will send a renewal letter around that time, but the rate on that letter is almost never their best offer. Getting 2 or 3 competing offers gives you real leverage to negotiate.

What are the costs of switching mortgage lenders in Canada?

In Quebec, typical transfer costs include the discharge fee for your old mortgage (around $250 to $400), notary fees for the subrogation (around $600 to $1,200), and sometimes a property appraisal ($350 to $500). Many lenders offer transfer programs that cover most or all of these fees to attract your file. Always ask for the full fee breakdown before signing.