Refinances Vs. Renewals

Refinances Vs. Renewals

Most people that get a mortgage decide to refinance or renew it at some point. 

Some even do it multiple times before finally paying off their mortgage. 

This is completely normal, but you should keep in mind that renewing and refinancing your mortgage are two completely different things. 

To help shed a bit of light on the differences between a mortgage renewal and a mortgage refinance, we will go over the definitions of the two, what they mean and do, and when it’s best to choose one or the other. 

What Is a Mortgage Renewal?

To put it simply, a mortgage renewal is when you renew, extend the term of your mortgage without taking additional finances. 

It mostly happens at, or near the end of your mortgage term when you want to extend it further to a few more years. 

You can stay with your current lender or choose a new one, the choice is up to you. 

What Is a Mortgage Refinance?

A mortgage refinance is completely different from a mortgage renewal because it doesn’t revolve around the sole extending of the duration of the mortgage, but the overall conditions of the mortgage agreement. 

It basically means you’re changing your mortgage agreement for a new one. 

Another major characteristic that makes a mortgage refinance different from a mortgage renewal is that it can happen at any point during the mortgage term, while a mortgage renewal happens at the end or near the end of the mortgage term

Renew or Refinance – Which One Should You Choose? 

Most people renew their mortgage when the term is close to ending, but they still haven’t paid the mortgage fully. 

You simply ask your lender to extend the time and the amortization period so you can keep paying the mortgage until you’ve completely repaid it. 

A refinance, on the other hand, is appealing in several scenarios. For instance, you may have found a better interest rate for the remaining term with another lender and want to take advantage of it. 

To avoid paying high closing costs, you may opt to refinance the mortgage for the maximum length of time and if you make some extra money during that time, put them in a bank and earn interest on it. 

Mortgage interest rates are expected to increase in the future, so locking in an interest rate at a certain level now can prove to be a great financial decision later on. 

The Costs 

Logically, both a mortgage renewal and a refinance come with their own costs, but refinancing usually costs more than a renewal.

This is mainly because a renewal simply involves extending the length of the mortgage term, something that suits most lenders, so they offer it for free. 

However, when you refinance your mortgage, you’re changing a major part of the mortgage agreement. 

When the mortgage contract changes, the new contract has to be legally changed and signed by all parties which results in higher legal costs that usually the borrower (you) covers.

A good mortgage broker (more on that here) can also help you calculate and understand your costs.


As you can see, a mortgage renewal and mortgage refinancing are completely different and used at a completely different time in the mortgage term. 

However, a lot of people confuse one with the other and don’t know which one they need and want to apply for when the time comes. 

Maybe you want to extend your mortgage term, but also change the lender.

Or maybe try to get a lower interest rate, so you need someone to show you the options and advise you on the best course of action to do this.

This is where our Dominion Lending mortgage agents step into the play. 

Having a professional next to you to advise you and guide you can be a tremendous help, especially when dealing with something as complex and confusing as mortgages, so don’t hesitate to reach out to one for whatever you may need!

We are dedicated to giving you the most helpful mortgage advice and giving you the best mortgage service, no matter what your needs are.

As mortgage agents who specialize in Refinance & Renewals, you can be sure that we have the solution for you that will take away all of the stress and get the best mortgage product for you.

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