Refinancing your mortgage can be a smart financial move, but when you refinance matters just as much as why. In Alberta, homeowners can refinance either at the end of their mortgage term (at renewal) or before the term is up (mid-term). Each option comes with different costs, rules, and considerations.
Understanding the differences can help you avoid unnecessary penalties and make a more informed decision.
Refinancing at Mortgage Renewal
Your mortgage renewal occurs when your current term ends, typically every 5 years.
Why refinancing at renewal is often simpler
- No prepayment penalties apply once your term has ended
- You’re free to switch lenders or renegotiate terms
- You can refinance to access home equity, change amortization, or adjust your mortgage structure
Because there are no early-break penalties, refinancing at renewal is usually the most cost-effective time to make changes to your mortgage.
Things to keep in mind
- You still need to qualify under current lending rules, including the mortgage stress test
- Legal and appraisal fees may apply, depending on the refinance amount and lender
Refinancing Mid-Term (Before Your Term Ends)
Mid-term refinancing means breaking your existing mortgage before the maturity date.
Why homeowners refinance mid-term
- To lower interest rates if rates have dropped significantly
- To consolidate higher-interest debt
- To access equity for renovations, investments, or major expenses
- Life changes such as divorce, job changes, or income restructuring
The cost of refinancing mid-term
The biggest consideration is the mortgage penalty.
- Variable-rate mortgages usually have a penalty of three months’ interest
- Fixed-rate mortgages typically carry the greater of:
- Three months’ interest, or
- The Interest Rate Differential (IRD), which can be substantial
- Three months’ interest, or
In Alberta, these penalties can easily reach thousands of dollars, so it’s critical to run the numbers before proceeding.
Renewal vs. Mid-Term: Key Differences at a Glance
| Factor | At Renewal | Mid-Term |
| Prepayment penalty | None | Yes |
| Ability to switch lenders | Yes | Yes (penalty applies) |
| Qualification required | Yes | Yes |
| Access to equity | Yes | Yes |
| Overall cost | Lower | Higher (due to penalties) |
Which Option Is Right for You?
Refinancing at renewal is often ideal if:
- Your goal is to restructure your mortgage without penalties
- You’re planning ahead and not in a rush
Refinancing mid-term may make sense if:
- The long-term savings outweigh the penalty
- You need access to equity now
- You’re consolidating high-interest debt or addressing a major life change
Get Advice Before You Refinance
Every mortgage is different, and penalties can vary widely between lenders. Before refinancing, especially in the mid-term, it’s essential to review your mortgage details and calculate the true cost versus the benefit.
A mortgage broker like Chris Marriner can help you compare scenarios, understand penalties, and determine whether refinancing now or waiting until renewal makes the most financial sense.
