Fixed or Variable, and How Long a Term? A Renewal Decision Guide

Question 1: How much rate uncertainty can you actually tolerate?

This is the fixed-vs-variable question, and it is a risk-tolerance question before it is a rate-prediction question. Variable rates have historically come out slightly cheaper than fixed over long periods, but that average hides the fact that they can rise before they fall, sometimes for years, and your payment (or amortization, depending on the product) moves with them.

If a payment increase of a few hundred dollars a month would force real changes to your budget, that risk has a cost even if variable turns out cheaper on average. If you have slack in your budget, savings to lean on, or the type of variable mortgage where the payment stays fixed and only the amortization shifts, you can absorb more uncertainty in exchange for a statistically better long-run rate.

Question 2: How long are you actually likely to stay?

Term length is often chosen out of habit — five years, because that is the default everyone picks — without checking it against your actual plans. If you expect to sell, move, or significantly change the mortgage (a large prepayment, a refinance to renovate) within two or three years, a shorter term avoids the risk of paying a penalty to break a longer one early, even though shorter terms sometimes carry a slightly higher rate.

Conversely, if you want to stop thinking about mortgage rates for as long as possible and your plans are stable, a longer term trades a small rate premium for years of certainty and one less renewal decision to make.

Question 3: Should you lock in now, or wait and see?

If your renewal date is still months away, many lenders let you lock in a rate 90 to 120 days ahead, with the option to take a lower rate if one becomes available before your renewal closes, but protection against a rate increase in the meantime. This is close to a free option in most cases — there is rarely a good reason not to lock in early once you're inside that window, even if you keep watching rates afterward.

If you are already floating past your renewal date on your lender's default terms, check what rate you're actually paying — some lenders quietly roll renewing mortgages onto a posted rate that is considerably higher than what you could get by simply asking, or by shopping elsewhere.

Question 4: Is it worth shopping other lenders, or renewing where you are?

Your current lender is counting on inertia — most people simply sign the renewal letter that arrives in the mail, which is often not the lender's best available rate. Getting one or two competing quotes, even informally, typically costs nothing and gives you either a better rate or leverage to ask your current lender to match it.

The most common mistake: chasing the lowest rate and ignoring the rest of the contract

Two mortgages at the same rate are not the same product. Prepayment privileges (how much extra you can pay down each year without penalty), portability (whether you can move the mortgage to a new property without breaking it), and how the penalty is calculated if you do break early all vary by lender, and can matter more than a rate difference of a tenth of a percent if your plans change mid-term.

What a higher renewal rate really does: a worked example

Take a $400,000 balance with 20 years of amortization remaining, renewing out of a 2.99% five-year term. With correct Canadian semi-annual compounding, the monthly payment at renewal looks like this:

Two things worth noticing. The jump is large but not proportional to the rate — a rate that nearly doubles does not double the payment, because principal repayment is unchanged. And the difference between renewal offers ($105 a month between 4.19% and 4.69% here) adds up to roughly $9,000–$10,000 of extra interest over a five-year term — which is what makes shopping the renewal worth actual effort. Model your own numbers with the renewal calculator.

Switching lenders got easier — know the current rules

Two structural facts work in your favour at renewal. Federally regulated lenders must send you a renewal statement at least 21 days before your term ends, so you are never supposed to be surprised by the date. And for a straight switch at renewal — same loan amount, same amortization, just a new lender — uninsured borrowers no longer face a fresh stress-test qualification, a change OSFI made in late 2024 that removed the biggest practical barrier to leaving your incumbent bank. Insured mortgages were already exempt.

The incumbent's first offer letter is usually not their best rate; it's the rate they hope you'll sign without looking. A written competing quote — from a broker, a monoline, or another bank — is the single most effective negotiation tool, and switching costs (appraisal, legal/transfer fees) are frequently covered by the new lender as an acquisition cost.

A short version, if you want one

If a payment increase would genuinely strain your budget: choose fixed, and lean toward a longer term for certainty. If you have room to absorb some swings and want the statistically better long-run average: variable is worth considering. If your plans might change within two to three years: pick a shorter term regardless of type. Either way, lock in a rate as soon as you're inside your lender's rate-hold window, and get at least one competing quote before you sign.

None of this replaces running your actual balance and rates through the calculator. Use the Mortgage Renewal Calculator →

Frequently asked questions

Can my lender refuse to renew?

If your payments are in good standing, renewal is virtually automatic at the incumbent — no requalification, no income documents, regardless of what has happened to your income since. This is also why staying put is the path of least resistance, and why lenders count on it.

What happens if I do nothing at the renewal date?

Many lenders roll you into an automatic renewal — often a six-month term at a rate well above their negotiated rates. It's a costly place to park; if you're there now, you can usually renegotiate into a proper term at any time.

Can I pay down a lump sum at renewal?

Yes — at the moment of renewal, between terms, you can usually prepay any amount with no penalty and no percentage cap. If a windfall is coming, this is the one date it faces no limits. See our prepayment privileges guide.

Should I change my amortization at renewal?

Renewal is the natural moment to shorten it (payments rise, total interest falls) or, if cash flow is tight, re-extend it — the latter usually requires refinancing rather than simple renewal, and trades lower payments for meaningfully more lifetime interest.

Official sources

• FCAC — Renewing your mortgage
• FCAC — Choosing a mortgage