Renewing a Mortgage? How to Minimize Payment Shock & Secure the Best Deal

With over 1.2 million Canadian mortgages set to renew this year, many homeowners are facing higher payments after locking in historic low rates years ago. While a mortgage renewal can feel overwhelming, there are strategies to reduce payment shock, explore better options, and take advantage of new competitive opportunities.

New Flexibility for Mortgage Renewals

A major positive change for 2024 and beyond is that homeowners with mortgages over $1 million or more than 20% down can now renew without undergoing the stress test. This means borrowers have more flexibility to shop around for better rates, rather than feeling stuck with their current lender.

What this means for you:

• More lender competition – Banks are now competing for your business, giving you a chance to negotiate better rates.

• More choices at renewal – You are no longer limited to your current lender’s offer if your mortgage qualifies for stress-test-free renewal.

• Potential savings – Taking advantage of this rule change could help offset rising costs.

Facing Higher Payments? Here's How to Prepare

While many homeowners expect an increase in their mortgage payments, there are smart strategies to reduce financial strain and position yourself for success:

1. Start Early & Explore Your Options

• Don’t accept the first renewal offer from your lender—shop around for better rates.🔹 Work with a mortgage broker who can compare multiple lenders and negotiate for you.

• Consider both fixed and variable rates based on your risk tolerance and financial goals.

• Pro tip: Banks tend to offer their best rates to new clients, so switching lenders could save you money.

2. Adjust Your Mortgage Structure to Reduce Payments

If you're worried about a higher monthly payment, here are some ways to make it more manageable:

• Extend your amortization (if eligible) to reduce monthly costs.

• Switch to monthly payments instead of bi-weekly to free up cash flow.

• Blend your rate if your lender offers this option, averaging your old and new rate for a smoother transition.

• Example: Maria, a homeowner in Tottenham, Ont., is switching from bi-weekly to monthly payments and extending her amortization to keep payments manageable.

  
  

3. Explore House Hacking: Turn Your Property into an Income Generator

Instead of cutting expenses, why not increase your income? If you have a basement apartment, a duplex setup, or space to build a laneway house, renting out part of your home can provide extra monthly cash flow to offset your mortgage payments.

• Convert unused space into a rental unit to generate passive income.

• Explore short-term rentals (if permitted in your area) for additional flexibility.

• Look into government incentives for adding secondary suites or laneway houses.

• Example: Many homeowners are turning to house hacking by renting out a portion of their property to reduce financial strain and make higher payments more manageable.

This Laneway House in Queen West generates over $4000 per month in rental income and more than $2000 in free cashflow.

The Good News: Canadians Are Resilient

Despite rising costs, Canada’s delinquency rates remain among the lowest globally. While some financial strain is expected, a wave of mortgage defaults is unlikely according to experts.

Phil Soper, President of Royal LePage, emphasizes that homeownership remains a top priority for Canadians, with most finding ways to adapt rather than fall behind on payments.

Final Thoughts: Take Action Now & Secure the Best Renewal Deal

With mortgage renewals happening at higher rates, it’s more important than ever to plan ahead, explore your options, and make informed decisions. Thanks to new flexibility in the market, you have more power than ever before to secure the best deal.

Need help with your mortgage renewal? We’re here to help you navigate the process, compare rates, and find the best solution for your financial goals. Contact us today!