What occurs during a mortgage renewal?

During a mortgage renewal, the existing mortgage is replaced for the same amount at term maturity. This process essentially allows the borrower to extend their mortgage for another term under the same set of conditions, although new terms regarding interest rates and amortization periods may be agreed upon. It’s a common practice because it offers borrowers the opportunity to reassess their financial situation and consider various options, including remaining with the same lender or switching to a new one.

The existing principal amount generally stays the same during the renewal, unless the borrower opts to increase their mortgage for reasons such as accessing home equity. This renewal typically takes place at the end of the mortgage term, providing a seamless transition in financing without requiring the borrower to settle all outstanding payments upfront. While borrowers have the option to choose a new lender during renewal, it's not a requirement, and they can simply renew with their current lender as well.