Renewing your mortgage? A guide for Canadians

For those in that position, as well as those whose mortgages expire in the next 12 months, it’s best to go into the renewal process armed with knowledge of the kind of terms you’ll face and your options. Knowing in advance what you’re in for can take some of the sting out of “rate shock.” Depending on what your current lender and others have to offer, it may even make sense to renew before your old mortgage expires.

Calculating your mortgage renewal

Use the MoneySense Mortgage Renewal Calculator to get a sense of what you’ll be paying once you renew. This tool allows you to play around with variables, such as the location, amount borrowed, mortgage term, amortization and payment frequency to help find loan terms that work for you. If your current lender has already extended proposed terms for renewal, you can determine whether they are competitive or whether you should consider shopping around. You can even add in related expenses such as property taxes and utility fees to calculate your total costs of home ownership going forward.

Should you change your mortgage terms and conditions?

Worried that you’ll get saddled with what ends up looking like a pricey mortgage for the next five years? If you’re confident rates will continue to decline, you can reduce the length of your mortgage term to three years, two—as little as six months. (Conversely, you may conclude you don’t want to go through this often stressful process again that soon.) Read our coverage to learn the ins and outs of altering your mortgage term.

Or you could consider switching to a variable- or floating-rate mortgage. That way you’ll always be paying a competitive rate of interest, whether it comes with fixed or variable payments. Be aware, though, that even fixed payments can end up rising if they hit a preset trigger rate. We’ve boiled down the arguments for fixed- versus variable-rate loans from some of Canada’s most knowledgeable mortgage minds.

How to cope with higher payments

Regardless of the form your new mortgage takes, you will almost certainly be paying more than the one you signed up for in 2019 or 2020. We’ve compiled a list of strategies for managing the higher cost of borrowing (and to not lose your home), from making prepayments when possible to extending your amortization period. You can’t ignore the rest of your financial picture, either; you may have to cut back on discretionary spending, consolidate your other debts or dip into savings and investments to get your household cash flow on a sustainable trajectory.

Compare the current rates in the table below. Just change the first variable to ”renewing,” and the others as they fit your situation.

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What if you hit a wall?

For some homeowners, a lender won’t offer to renew their mortgage at any price. In a higher rate environment or after a troubled mortgage term, your bank may simply decline your mortgage renewal application. Know that that is far from the end of the road. This article about what to do when your renewal is declined also explains how you can try to find a new, willing lender before resorting to the ultimate solution to mortgage-renewal trauma: selling your home.

Read more on mortgage finance:

• Why are mortgages so expensive in Canada?
• Second mortgages in Canada: What are the rules?
• New mortgage changes for 2024: Wider access to 30-year mortgages and more
• High borrowing costs, record completions lead to condo oversupply

About Michael McCullough

Michael is a financial writer and editor in Duncan, B.C. He’s a former managing editor of Canadian Business and editorial director of Canada Wide Media. He also writes for The Globe and Mail and BCBusiness.

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