What is the difference between Mortgage Renewal and Refinancing?

MORTGAGE RENEWAL

At the end of your mortgage term (e.g., 5 years, ...), the borrower should expect the mortgage renewal, which is the process of renegotiating the terms and conditions of your existing mortgage agreement with your current lender.

The lender usually sends you a renewal letter way before the maturity date and offers you a new interest rate (most of the time) under the proposed terms & condition. During renewal, you have the option to stay with your current lender while you don't usually need to go through the approval process.

However, renewal does not involve borrowing additional money beyond what is remaining on your existing mortgage balance.

REFINANCING

Refinancing occurs when you change your lender to replace your existing mortgage with a new one, mostly with different terms, a new interest rate, and potentially an increased loan amount.

Refinancing can also occur at any time during your mortgage term, not only at the end necessarily. The strategy behind is to benefit from a lower interest rate (if the market offers lower interest rates), consolidate debt, access home equity for renovations or investments, or change mortgage terms.

In most of refinancing scenarios, the initial goal of refinancing is to borrow more money or restructure your mortgage to better suits your financial inquiries. Having said that, the challenge with refinancing is like applying for a new mortgage which requires the approval process.

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