Mortgage Refinance Mortgage Renewal/Switch

Difference Between Mortgage Refinance versus Mortgage Renewal

When it comes to mortgages, there are many details involved. Mortgage in Canada allows Canadians to own landed properties despite not having the complete fund for the properties. A mortgage is a loan service on properties, which people have enjoyed over the years. Mortgage refinance and mortgage renewal is well-known mortgage terms in the mortgage business. These two concepts are used interchangeably but are different in operation.

Mortgage renewal is more short-term, while mortgage refinance is extensive. Therefore, to correctly identify the difference between both, this article will discuss the details of mortgage refinance and renewal. Then, we will assess the differences in their operation. But first, let us begin with a definition of both.

What is Mortgage Renewal?

In simple terms, Mortgage renewal refers to extending the details of an existing loan. So, mortgage renewal is the act of negotiating the terms and conditions of a current loan contract, especially after the loan’s maturity. When a mortgage matures and you do not have the funds to pay it off, you can choose to renew the mortgage. This can be done based on the existing agreement. The contract would then be renewed for another period, thereby setting another maturity date.

What is Mortgage Refinance?

On the other hand, mortgage refinance refers to a total overhaul of the loan details, unlike mortgage renewal, which simply extends the existing mortgage contract. Mortgage Refinance is the replacement of the existing loan details with a new one. This happens after the maturity of the mortgage; you then renegotiate with the lender to create another mortgage with new details if you are unable to pay off the debt.

Differences between Mortgage Renewal and Refinance

Before we assess the differences between the two concepts, let us first identify the few similarities between them. There are not many similarities between renewal and refinance. The situation that leads to either of the mortgages can be compared for similarities. Mortgage renewal and refinance can only happen at the maturity of the loan. If a loan does not expire or mature, there is no need to renew or even create a new loan detail. Also, mortgage renewal and refinance do the same job of maintaining the existing contract of the loan.

Despite this, there are various situations that you might need to renew or refinance a loan. But in all, it depends on the condition of the individual. 

Here are some differences between a mortgage renewal and a mortgage refinance.

Best Mortgage Online Canada

Type of Loan

The mortgage renewal and mortgage refinance both have different types of loans. Often mortgage renewal is applicable for short-term loans, loans that last one to two years with interest. These types of loans are known as open-ended loans. These loans are easily adjusted and include payment of interest. These loans are short-term, lasting between one to two years of maturity. Some of the types of loans that can be renewed are time notes, letters of credit, lines of credit. The details of these loans, such as the interest rate, the credit limit, do not change. The only thing that changes is the maturity time. A maturity time of about one year is often agreed upon.

While mortgage refinances are typically for close-ended loans. These loans are often longer and include amortizing loans, vehicle loans, commercial mortgages, and the likes. In this case, the lender does not renew the existing loan but replaces it with another.

Details of the Loan

Another primary difference between mortgage renewal and refinance is the mortgage details. However, both of them can be done in a way that the details of the loan, such as the credit limit, maturity date, and interest, can remain the same as the previous loan. But oftentimes, the details of the mortgage refinance are different from the previous loan it replaced. The lender renegotiates a maturity period with the borrower as well as a new interest rate.

Therefore, a mortgage refinance involves a complete replacement of the loan after the initial one has matured.  

Bank and Borrower

For a mortgage renewal, the bank or lender often approaches the borrower. While for a mortgage refinance, the borrower is usually the one who approaches the lender.

When the maturity period of the initial loan is almost up, the bank often contacts the borrower to give them options they can take. The borrower is informed that they need to pay the loan in full or submit their financial details for review. After their financial information is reviewed, the lender will now notify the borrower if they can renew their loan or not.

While for a mortgage refinance, the borrower approaches the lender. In this instance, the borrower contacts the lender to create a new loan. This contact can be with the current lender or an entirely new lender. The refinance process is simply like starting a new loan. You would have to file all required financial documents and supporting documents to the lender.


In summary, there are similarities between mortgage renewal and mortgage refinance. Although there still exist stark differences between both of them. The similarities often end in a way that they both occur after the maturity of a loan and the maintenance of the details of the existing loan.

But in terms of differences, they vary from the type of loans, open-ended to close-ended loans. Even the details of the loans differ from each other. The process of applying for each differ, as discussed above. Therefore, we can state that each has its usefulness and need in each situation from the above discussed. Applying for a refinance is best when a client cannot extend a loan but ensure that you get a mortgage. Although, this might be with a new lender and with new details.

These are the main differences between a mortgage renewal and refinance. So, when your mortgage is about to mature, you know the options available to you. And you also know the best option available to you based on your situation.

Get to know more about Mortgage in Canada with Best Mortgage Online.

Leave a Reply

Your email address will not be published. Required fields are marked *