Tips for When your Mortgage is Up for Renewal

With 20% of mortgages up for renewal in the next year, many borrowers are facing higher interest rates for the first time and potentially sky-high payments. If you’re among this group of homeowners, here’s what you should know to navigate this situation and minimize the payment shock.

If you don’t like your bank’s renewal offer, you can try to negotiate. Or you can work with a mortgage broker unaffiliated with your current mortgage provider to see if they can find you a better deal at another financial institution. Keep in mind that if you’re looking to jump lenders, you are subjected to the stress test to qualify, which today could be at a rate in excess of 8%. Should you have trouble qualifying elsewhere, you’re at the mercy of your current lender who will likely not offer you the best rate possible.

Many assume lowest rate always means lowest payment but that is not the case with a renewal. Consider resetting the amortization. This will reduce the payment, sometimes substantially. But lower monthly payments also mean you will build equity in your property more slowly. You’ll also end up paying more interest to your lender over the longer amortization period. And since this is considered a refinance, there will be a few expenses to re-registering the mortgage.

Regardless of what you decide to do, you should expect that interest rates will not return to the levels they were at in 2020 and 2021 anytime soon, if ever. Some industry insiders anticipate rates to recede no lower than 4% once the Bank of Canada cuts rates.