Renewing Your Mortgage? There’s More to Budget for Than a Higher Rate

Problems of the moment will be central to upcoming renewal discussions. But the evergreen costs associated with renewing a mortgage shouldn’t be overlooked.

These costs can change dramatically depending on how you tackle a renewal. It’s important to understand when you might encounter them and how much they could cost.

A few fees here and there won’t bite into your finances like your new mortgage payment will, but you’ll still need to budget for them.

Fees you might pay when renewing your mortgage

There are two general scenarios to choose from if you’re simply renewing your mortgage: stick with your current lender or switch to a new one.

In most cases, renewing with your current lender won’t trigger any additional charges (though some alternative and private lenders do charge renewal fees). You will, however, pay a substantial opportunity cost if you don’t negotiate your renewal rate and wind up paying more interest than necessary.

If negotiations don’t result in a rate you’re happy with, you can always move your mortgage to a new lender. If you make no other changes to your loan, that’s considered a renewal switch.

In this instance, you might encounter a few different fees.

Discharge fee

When you leave your current lender, they’ll charge a discharge fee to remove their lien on your title so your new lender can register theirs. The discharge fee can cost up to $400, depending on the lender and area, says Tara Webber, a mortgage broker with Be One Financial Group in Nanaimo, British Columbia.

Legal fee

Processing a mortgage requires legal paperwork to adjust the title and a lawyer to oversee it all. Legal fees vary based on the complexity of the loan file and your province, but can add up to several hundreds of dollars or more.

Assignment fee

Some lenders charge an administrative fee for transferring your loan, called an assignment fee. Assignment fees aren’t universal. They vary by lender; some of whom may bundle them into the discharge process, Webber notes. An assignment fee might be as high as $400.

Andrew Thake, a mortgage broker with Smart Debt Mortgages in Ottawa, Ontario, says many lenders offer to cover or waive their fees to earn your business. But switching lenders generally only makes sense if the savings “more than offset any fees that could come up,” he adds.

Make sure to consult your lender about when you’re actually able to renew. When mortgage rates are rising, it can be tempting to renew early to lock in at today’s rates. But renewing too far in advance can trigger a prepayment penalty that wipes out any benefits.

Switching to an alternative or private lender could cost even more

If your financial situation has changed drastically — through job loss, downgraded credit or a drop in qualifying income — you might have trouble finding a lender to offer you renewal terms.

As a last resort, you may need to seek out an alternative or private lender.

If so, you could pay a fee of up to 1.5% of the loan amount, on top of the usual legal and appraisal fees, Webber says. She adds that private lenders charge this additional fee to compensate for the short-term nature of most private loans.

Costs to expect if you’re refinancing at renewal

If current economic conditions are throttling your household’s cash flow, refinancing might be an option at renewal.

Refinancing at this point allows you to pull out equity or restructure your mortgage. You could, for example, extend your amortization period to secure smaller monthly payments without triggering the prepayment penalties associated with a mid-term refinance.

With a refinance, you’re essentially qualifying for a new mortgage. The added complexity could mean higher costs than with a renewal.

A refinance, for example, might require more significant legal fees. You’ll also pay an appraisal fee between $300 and $600 so the lender can confirm your home’s current market value, and a fee to register the new mortgage.

While refinance fees are usually paid by the borrower, many lenders are willing to cover them right now to drum up new business, Thake says. It doesn’t hurt to ask your lender what they’re willing to do for you.

There are also long-term interest costs to consider when refinancing.

Thake notes that refinance rates, particularly those tied to cash-out refinances, are higher than renewal rates. And if you refinance to extend your amortization period, you could pay significantly more in interest over the life of your loan.

Bottom line: Pit lenders against one another

Last year, the Bank of Canada estimated that homeowners renewing in 2026 could see their mortgage payments rise by up to 20% versus what they paid in December 2024.

A cost increase like that demands action. So what can you do?

Whether it’s on fees or interest rates, it’s crucial to get lenders to compete for your business. Ask which of the fees outlined here they’re willing to cover — and if there are any other costs they’ll absorb on your behalf.

There will be no competition to leverage if you sign your renewal offer without weighing other options. Allot time for this stage of the process, and consider tagging in a mortgage broker to do it for you. A broker can compare both rates and fees at various lenders to help you make a more informed choice.

Webber suggests asking your lender for a payout statement, a document that explains the exact amount you’ll owe if you switch lenders. It’s a clear signal that you’re shopping around, and it might help you score a better rate without changing lenders — and without paying all those fees.

The article Renewing Your Mortgage? There’s More to Budget for Than a Higher Rate originally appeared on NerdWallet.