Renewal vs. Refinance: What Homeowners Need to Know When Home Values Are Dropping

Every time the market softens, a wave of fear spreads through homeowners - and understandably so. When headlines focus on declining home values, people start to worry about what that means for their mortgage. In the last week alone, I had a realtor partner reach out because several of her clients were terrified they might not be able to renew their mortgage due to falling prices.

Some even feared the worst:
 “Could my lender force me to sell because my home isn’t worth what it used to be?”

If you’ve wondered the same thing, you’re not alone.
And the good news is this: declining home values do not put your renewal at risk.
But they can impact a refinance - and understanding the difference between the two is where all the clarity lives.

Let’s break this down simply, clearly, and without the industry jargon.

What a Renewal Actually Is - And Why It’s So Safe

When your mortgage term ends, you have a choice: stay with your current lender or move your mortgage to another one. This is called a renewal.

Here’s the key point that stops 90% of the worry: If you renew with your current lender, you do NOT need to re-qualify.
That means:

• No credit check
• No income verification
• No stress test
• No appraisal
• No reconsideration of your home value

Mortgage renewals with the same lender are essentially a continuation of your existing agreement. You’ve already proven your repayment history simply by making your payments. If your lender is happy with your payment track record - and you’ve stayed in good standing - your renewal is straightforward.

This is true even in a declining market.

Home values dropping has zero effect on your ability to renew with your current lender. They are not rechecking your equity. They are not reassessing your loan-to-value. They are not looking at the market.

This is why renewals are considered the lowest-stress event in the mortgage world.

What Happens If You Want to Switch Lenders at Renewal?

Switching lenders - also called a “transfer” - is slightly different, but still nothing to fear.

A new lender may require:

• An appraisal (depending on whether your existing mortgage is insured or conventional)
• Updated income documents

But even with these requirements, lender switches are far easier than new mortgage applications.

Why?
Because most lenders allow clients switching at renewal to qualify using the contract rate, not the stress test. This is a huge advantage in today’s rate environment.

So yes, switching may involve a little more paperwork - but it can also help you secure better terms, better rates, or better service.

And importantly:
A lender declining a switch at renewal does NOT put your home at risk.
You can always renew with your current lender.

You never lose the option to stay put.

Where Home Value Does Matter: Refinancing

This is where the confusion usually starts - because refinancing is an entirely different process.

A refinance is when you change the structure of your mortgage. Usually this involves borrowing more money. You might refinance to:

• Consolidate higher-interest debt
• Fund renovations
• Access equity for a second property
• Add or increase a HELOC

Because this involves increasing your loan amount, lenders need to re-evaluate:

• Your income
• Your credit
• Your home value

That’s why an appraisal is always required for refinances - no matter which lender you use.

And because refinancing relies on available equity, declining home values can affect whether the refinance is approved.

Here’s what that actually means:

A refinance can be declined due to insufficient equity - but this does NOT impact your ability to stay in your home.
This is probably the most important sentence in this entire blog.

A lender declining a refinance does not affect:

• Your renewal
• Your current loan
• Your homeownership
• Your ability to stay in your home

The only time lenders pursue forced sales is in cases of default - not market dips.

Even if your home value has dropped dramatically, as long as you’re making payments on time, you are not at risk.

Why This Distinction Matters in a Softer Market

When prices are rising, nobody worries about equity or refinancing. When prices start falling, fear fills the gap - often driven by misinformation, headlines, or worst-case scenarios people read online.

But here’s the reality:

Renewal (same lender)

• No appraisal
• No re-qualification
• No impact from lower home values

Renewal (switch lender)

• Possible appraisal
• Income documents needed
• Often qualified at the contract rate (easier)

Refinance

• Appraisal required
• Approval depends on available equity
• Declined refinance ≠ losing your home

Once clients understand this, the stress drops immediately.
And this is where empowering information becomes far more valuable than fear-based assumptions.

A Real Example (Without Names)

The realtor who reached out this week had clients who purchased during the peak of the market. Now, their home is worth less on paper. They were approaching renewal and worried:

“What if the lender says no because our value dropped?”

My answer was simple:
Your lender does not require an appraisal for a straightforward renewal.
Your renewal is not impacted by declining home values.
Nobody is forcing you to sell.
You’re simply signing into a new term.

The relief on their faces was instant.This type of clarity changes everything.

So What’s the Best Move for Homeowners Right Now?

Here are the steps I encourage for every homeowner - especially in a shifting market:

1. Start your renewal review early (6–12 months ahead).
This gives you time to compare options, understand penalties, watch rates, and avoid rush decisions.

2. Know whether you’re renewing or refinancing.
They are not the same thing - and the documentation, process, and requirements are completely different.

3. Don’t panic about your home value.
Unless you’re refinancing, it may not matter at all.

4. Get clear on your long-term goals.
Do you want lower payments? Flexibility? A HELOC for renovations? A strategy to reduce your total cost of borrowing?

As I always tell clients:
“We do not chase the lowest rate. We build the lowest cost of borrowing.”

Renewals are one of the best opportunities to align your mortgage with your goals - without the stress of requalifying.

Final Thoughts

The market may fluctuate, but your stability shouldn’t.

Understanding the difference between renewals and refinances is one of the simplest ways to reduce anxiety, make confident choices, and avoid unnecessary fear. Declining home values do not threaten your renewal. Refinances may require more care - but with the right plan and the right guidance, you can navigate both confidently.

If your renewal is coming up this year (or even early next year), now is the perfect time to start reviewing your options.

Book a call at www.mortgagecall.ca or email [email protected]