What’s the difference between a refinance and a renewal?

A renewal happens when your existing mortgage term ends and you sign a new term — either with your current lender or a new one — for the same outstanding balance and remaining amortization. It’s a natural, penalty-free transition point in the life of your mortgage.

A refinance happens when you increase your mortgage balance before your term ends — commonly to consolidate higher-interest debt, access home equity for renovations or investments, or change your mortgage structure. Because a refinance breaks your existing mortgage contract early, it typically involves a prepayment penalty, and refinance rates tend to run slightly higher than renewal rates.