Mortgage Renewal vs. Refinancing: What’s the Difference?

If you’re a homeowner, you may be staring down one important question: To renew or refinance your mortgage? Though the two words are often used interchangeably, they mean quite different things — and the term you embrace could greatly affect your finances.

In this piece, we’ll dissect the difference between mortgage renewal and refinancing, the pros and cons of both, and how to figure out which one is right for you.

What Is a Mortgage Renewal?

A mortgage renewal is when your term comes to an end and yet you have a balance remaining. Rather than paying off the entire loan, you just “renew” it for another term — typically with the same lender.

During renewal, you can:

• Negotiate your interest rate
• Change length of the new term
• Revisit payment frequency
• Possibly compare offers with other lenders for better terms

Example:

If you have a 5 year mortgage term and your loan is no where near paid in full at the end of 5 years, you will need to renew your mortgage for another 5 years (or whatever term length) until the loan is fully paid.

Key Point: Renewal allows you to stay with your current mortgage (usually under updated terms).

What Is Mortgage Refinancing?

Refinancing is when you replace a mortgage with a similar product, ideally one that gives you better terms or fits your budget more effectively — it could come from the original lender or a new one. It’s essentially starting fresh.

• Homeowners typically refinance to:
• Secure a lower interest rate
• Alter the duration of their mortgage (shorter or longer term)
• Refinance from an ARM to a fixed-rate mortgage (or vice versa)
• Tap home equity with a cash-out refinance
• Consolidate debt

Example:

If you’ve got 20 years remaining on your current loan but you’re eyeing lower rates, consider refinancing into a new 20-year mortgage — or chop three more years off your term and refinance into a 15-year loan to retire that home debt even sooner.

Pros and Cons

Mortgage Renewal

✅ Simpler process

✅ Minimal costs

✅ It could be a chance to negotiate down the rate

❌ Less flexibility than financing

Mortgage Refinancing

✅ Potential to save a lot on interest

✅ Access to equity for renovations, debt repayment or investments

✅ Ability to switch between loan type and terms

❌ May require closing costs, penalties, or fees

❌ More complicated than renewing it

How to Decided: Renewal vs. Refinancing?

Ask yourself these questions:

Are you satisfied with your mortgage and lender? → Renewal may be best.

Do you wish to save money with a reduced rate or shift loan types? → Consider refinancing.

Do you require funds for home improvement or debt consolidation? → Refinancing (cash-out) could help.

Are you coming to the end of your term and there is no significant financial shift you need to make? → Replacing is easier and cheaper.

Mortgage renewal and refinancing both have their utility — but they are not the same. Renewal is a deal to extend the length of your mortgage, whereas refinancing is the chance to restructure your loan so it better reflects your financial needs.

At Monalending we have to ask the homeowners if it is better for them to work on a renewal or refinance. Whether you’re hoping to secure a lower rate, leverage equity or make your mortgage quick and simple, we’ve got you covered.

Ready to explore your options? Give Monalending a call to find out if refinancing or renewal is best for you.