If your mortgage renewal is approaching in 2025, you might be feeling uneasy about rising interest rates and their impact on your monthly payments. Many homeowners secured mortgages at historically low rates during the pandemic—now, as renewals take place in a different financial climate, borrowers must prepare for higher costs. But don’t worry, strategic planning can help you navigate these changes with confidence.

Why Are Mortgage Payments Increasing?

Interest rates were at record lows throughout the pandemic, making homeownership more affordable for many Canadians. Now, with rates significantly higher than before, renewing homeowners are seeing an increase in their monthly payments. The Bank of Canada estimates that 60% of mortgages will renew in 2025 and 2026, meaning a large number of borrowers will need to rethink their financial strategy.

How Higher Rates Affect Homeowners

A jump in mortgage payments can strain your budget, but there are proactive steps you can take to mitigate financial stress and secure manageable payment terms.

What You Can Do to Prepare

✅ Assess Your Financial Position: Review your income, expenses, and any discretionary spending to identify cost-cutting opportunities. 

 ✅ Explore Refinancing Options: Extending your amortization period or refinancing to a more flexible mortgage can ease your monthly payment burden. 

 ✅ Lock In Your Rate Early: If your renewal is nearing, consider locking in a favorable rate before further increases occur. 

 ✅ Consult a Mortgage Expert: Speaking with a professional can help you uncover personalized solutions, from debt consolidation to mortgage restructuring.

Frequently Asked Questions

💡 How much will my monthly payments increase? The exact amount depends on your original mortgage rate, your new rate upon renewal, and your remaining balance. If you secured a mortgage at 2-3%, expect potential renewal rates between 4-6%, leading to a significant monthly payment increase.

💡 Should I switch from a variable-rate to a fixed-rate mortgage? This decision depends on your comfort level with risk. Fixed rates provide stability in uncertain economic times, while variable rates historically offer savings over the long term. Consulting a mortgage expert can help you weigh the pros and cons.

💡 Is refinancing worth considering? Refinancing may lower your payments or consolidate debt, but extending your mortgage term means paying more interest over time. Weigh the short-term benefits against the long-term costs with professional guidance.

Let’s Plan Your Renewal Together

Mortgage renewals don’t have to feel overwhelming. By reviewing your financial situation early, exploring refinancing possibilities, and seeking expert advice, you can ensure a smooth renewal process.

Ready to discuss your mortgage options? Reach out to us today to create a strategy that keeps your payments manageable while securing your financial future.

In order to make sure that every client's file is set-up for success right up to and past closing day, Mortgage Foundations follows a Client Journey. Today, we will discuss the steps involved throughout the Client Journey and explain what happens at each step in the process.

The first step in the Client Journey is the Discovery Call and Mortgage Application step. This is where we learn as much as possible about your mortgage application and ask questions to ensure we are clear about your goals and requirements for your home financing needs. During this step we also answer any questions that you may have in order to find out the benefits of working with a Mortgage Broker, specifically Mortgage Foundations. We will also take this opportunity to give you an accurate idea of what to expect through the home financing process and ensure that you are aware of closing costs and document requirements so there is little room for surprises later.

The next step may not always be required since you may have already secured a property or are looking for home financing options other than purchasing a property; such as a switch or re-finance. If you are actively searching for a property, or planning to shortly, the Mortgage Pre-Approval step is highly recommended as it will allow us to submit your file to a lender that will review everything and ensure that nothing has been missed and it will give them the opportunity to ask any questions ahead of time for further clarity on the file. A pre-approval is also an opportunity to obtain an interest rate hold so that you can shop for a property with the confidence of having a rate in place. The rate hold will protect you from interest rate increases up to the expiration of the pre-approval. If rates end up coming down below your rate hold by the time you secure a property, you will receive the lower rate. Pre-approvals are conditional, and since they have been generated based on some unknowns, such as the property, a condition of financing is always recommended, even with a pre-approval.

While you are shopping for your next home, we will be sure to keep in contact and always recommend that you run any potential properties by us so that we can check the qualifying using the actual figures for the property. During this time, it is also important to keep everything as-is in regards to employment, liabilities, bill payments, and your credit profile overall. Unexpected changes to these things could end up affecting your qualification when you do find a property and we submit for a commitment.

Speaking of a commitment, that is the next step in the Client Journey. Once you have obtained an accepted offer on a property, we can then re-work the file and update any information that needs to be and then submit for what is commonly referred to as a live submission. At this point, the lender will review the file completely, including the property information, and also ensure that it meets the insurers' guidelines if it will be an insured or insurable mortgage. Once the lender confirms everything is good and that they are in a position to approve the mortgage they will issue a commitment. The commitment will include any conditions that need to be met by a certain amount of time ahead of closing day. We always strive to get as much documentation up front; however, it is usually at this step where we request additional documents in order to satisfy the lender's conditions. Once you have received the commitment, reviewed it, and are comfortable that you will be able to meet the conditions, we arrange to have the commitment and other documents signed and returned to the lender. This is also where we discuss the importance of having coverage such as Mortgage Protection Plan, or MPP in place, since anything can happen and you will want to ensure that you and your family are protected. Coverage can even start ahead of closing while we are working on clearing the conditions of your mortgage.  

Working together to get the conditions satisfied well ahead of time is imperative to make sure that the lawyer, or solicitor, can get to work on their side nice and early, since the lawyer getting instructed by the lender is the next step once we are broker complete or close to. Your lawyer will receive all their documents with instructions on what needs to be done for the lender to supply the funds to close the mortgage on closing day. We will be there to assist your lawyer with anything they may need from us to make for a seamless process for them.

Once your lawyer has everything prepared for your closing, they will reach out to set a date and time with you to perform the final signing and will also let you know how much funds you will need to supply them in order for the mortgage to close. This amount will be comprised of your down payment, legal fees, registration costs, land transfer taxes, title insurance and any other adjustments, taxes or fees that apply. It is also important that you make sure to take up to date valid identification to your meeting with the lawyer since they are required to confirm your identity.

After the signing is complete and everything is ready to go, we proceed to the biggest and most exciting step, which is the closing day. This is the day where everything happens, and all the money moves around between the lender and the lawyers, and the final registrations are taken care of. Once the seller's lawyer confirms that they have received the funds to complete the sale, you will receive the keys to your new property. If the transaction was a switch or re-finance, it is very much the same; money just moves in different directions.

Now that your mortgage is closed and you have received your refinance funds or are settling into your new home, our job is far from over. We will follow-up with you shortly after closing to make sure that everything went smoothly, remind you of when to expect your first payment to come out, and answer any questions that you may have. After this, we will continue to remain in contact, including on your annual mortgage anniversary, where we will update you with property information and can work with you to review your mortgage to ensure that it still fits your goals and is suitable for any potential future changes. As your dedicated mortgage professional, we are always there for any advice or to answer any questions you may have since the client journey is ongoing.

Let's say you have a mortgage commitment from a lender, and prior to the closing date, rates change and come down a bit. Today, we will discuss how this change in rates can potentially benefit you and save you some money in interest expense; or how a rate change can affect how much more you could potentially qualify for if you have a pre-approval with a rate hold.

Rates are rarely static with any lender and can change weekly or even daily. When you have a mortgage commitment, you are protected from rate increases as long as there are no material changes in the application prior to the closing date; however, if rates come down before closing, you may be able to take advantage of this new lower rate.

It is important to discuss any potential rate adjustments with your Mortgage Broker since every lender is different, and some allow for multiple rate adjustments on a file, and some allow only one or even none. It is also important to consider how close to closing the rate adjustment opportunity is, as if it is too close to the closing date, the lender may not have time to make the adjustment and issue new documentation for the lawyer. When dealing with a lender that only allows one rate adjustment, the decision of when to request it is to be made strategically to limit the possibility of adjusting the rate down and then watching them fall further without the ability to make another change.

Even though rates are always changing, it should not be expected to see a drastic change in rates between when you receive the mortgage commitment and the closing date; however, even a small change can make a difference in not only your interest expense over the term of your mortgage; but, also the amount of the monthly payment, which will increase your cash flow with each payment.

For our example, we will use a $500,000 mortgage amount with a 5 year fixed rate that is amortized over 25 years. The original interest rate on the mortgage commitment is 4.99% and a few weeks before closing the lender reduces their rate to 4.89% on the same term and mortgage product. Your Mortgage Broker would check with the lender if a rate adjustment, or float down, as it is known in the industry, is available and would present the following to you to see if you would like to have the rate adjustment applied.

The rate reduction would result in a payment that would be $28 lower per month and would not only save you $2,400 over the 5 year term; but, would also result in $700 more principal being paid, for a net savings of $3,100. Not to bad for a simple request from the lender.

When it comes to how a rate decrease affects a pre-approval, it isn't that it changes the pre-approval itself since the rate on the pre-approval certificate is held and in effect for 4 months; it can however change the amount that you would qualify for if you find and secure a property with an accepted offer to purchase while the lower rate is active. This can be helpful if your qualifying amount on your pre-approval is a bit lower than what is required to purchase a property in the location you are looking at; sometimes a couple extra thousand dollars is enough to get an accepted offer.

For example, let's say you have a pre-approval for a maximum purchase price of $700,000 and a rate of 4.99% held and rates come down to 4.79% while you are shopping for a property. The purchase amount that you would potentially be able to qualify for with this new rate would be $711,000, or an increase of $11,000. It is important to note that you must ensure to discuss this with your Mortgage Broker so that they can adjust qualifying based on actual amounts for the property; and of course, even with a pre-approval, a condition of financing is a must in order to protect yourself.

When shopping for a new mortgage, a common source of confusion is the difference between the mortgage term, which is normally 1 to 5 years, and the amortization period, which is normally 25 or 30 years.

The basic explanation for the difference between the two timelines is that the mortgage term is the length of the current mortgage contract, and the amortization period is the total life of the mortgage. A typical insured mortgage in Canada features a 5-year term and a 25-year amortization period. There are mortgage terms as long as 10-years in Canada; however, the majority of mortgages feature a 5-year term or less.

Throughout the life of a mortgage, it is expected that there will be multiple terms as the mortgage is renewed with the same lender or even when switched over to a new lender. A great example of the difference between the term and amortization period is to think of a pizza. Basically, the whole pizza would represent the amortization period, and each slice would represent each term. Using the typical insured mortgage of a 5-yerm term and 25-year amortization, 5 slices, or terms, would make up the whole pizza, or amortization period. Considering that not all terms would be equal, and clients can elect to have a shorter or longer term at renewal time, the slices may not all be the same size.

The mortgage term is the time that the mortgage contract is in effect and represents the period that both you and the lenders are committed to for the mortgage, its rate, and the terms and conditions of the mortgage. Mortgage terms typically range from 1 to 5 years; however, can be as short as 6 months and as long as 10 years. Typically, a shorter term will feature a higher rate of interest versus a longer term up to 5 years, which commonly features the lowest interest rates. Longer terms, such as 7 and 10 years, may also feature a higher interest rate as well.

At the end of the mortgage term, you will have the opportunity to renew your mortgage with the current lender or have your mortgage broker look for other options to potentially switch your mortgage to a new lender or look at potential refinancing options if required. The renewal date is when it is recommended to make any changes in order to limit your exposure to potential fees and penalties.

The mortgage amortization period is the time that it would take to payoff the mortgage in full. The amortization period is an estimate and is based on the current interest rate; which may change upon future renewals. Amortization periods on new mortgages are typically 25 or 30 years, with 25 years being the maximum amortization period for an insured mortgage with less than 20% down payment. Although 25 to 30 years is the most common amortization period for mortgages; some alternative lenders do offer amortization periods of 35 years or more.

When it comes to how amortization affects your interest cost, keep in mind that the shorter the amortization, the higher the payment and the lower the interest. The benefit to a longer amortization is that your payment will be lower than compared to a shorter amortization; however, the offset is that your interest expense may be higher if you don't take advantage of prepayment privileges throughout the life of the mortgage. When considering a longer amortization period, you should discuss this with your mortgage broker and ensure that the increased cash flow resulting from the lower payments is worth the possible extra expense in interest. A longer amortization period can add tens of thousands of dollars to the cost of your mortgage and options should be understood ahead of time.

Mortgage renewals are a reality of most mortgages and is an important step in managing your finances; the importance of paying attention to them should definitely not be overlooked; however, this happens far too often. To start off, let's clarify what a mortgage renewal actually means. When you first took out your mortgage, you agreed to certain terms and conditions, including the length of your mortgage term. This term typically lasts for a period of 1 to 5 years, during which time you make regular mortgage payments. However, once your term is coming to an end, you have the option to renew your mortgage with your current lender or consider switching to a new lender if that makes more sense. Now, you might be wondering why you would consider switching lenders when your term ends. Well, there are a few reasons for this. Firstly, shopping around for a new mortgage can allow you to potentially secure a lower interest rate; you might be able to save a substantial amount of money by switching to a new lender with a lower rate. Secondly, you might be interested in changing your mortgage terms or exploring different options that better suit your current financial goals. Many lenders may allow you to adjust your amortization while switching the mortgage over to them; this could either save you extra money by lowering the amortization; or you may be able to increase cash flow by extending the amortization back out. This is a great opportunity to reassess your needs and make any necessary adjustments. The first step in the renewal process is to review the options presented by your current lender; they will provide you with a renewal offer, which outlines the new terms and conditions they have available for you. It's crucial to carefully review this offer and compare it to other available options in the market. This is where a Mortgage Broker comes in handy during the renewal process. Remember, the goal is to secure the best possible terms, features and interest rate for your mortgage; they have access to many different lenders and can compare the rates and required mortgage features on your behalf. It should be noted that renewal offers can go a couple of ways; one is that your current lender sends the renewal notice with higher rates in the hopes that the ease of being able to sign the renewal offer while assuming they are giving you their best offer is preferred. On the other hand; your lender may be offering very competitive retention rates in order to be proactive and keep your business. A Mortgage Broker will be able to highlight this quickly with you and see if it is beneficial to switch or just stay where you are. When it comes to renewing your mortgage, it's essential to start the process well in advance of your current term's expiry date. This will give you enough time to explore your options, gather necessary documents, and ensure a smooth transition while being prepared for when your lender presents their offer. Roughly four to six months before your term ends is a good timeframe to begin preparing for your renewal process. With that being said, your lender may delay the renewal notice being sent out until as little as 30 days before renewal; even if your renewal is close and depending on the options with the current lender, a switch may be able to still take place, even in a time crunch. If you choose to remain with your current lender; the renewal process may be quite simple; in many cases you make your choice on the renewal document, sign and return it; or communicate with your lender in whichever way they prefer. After the renewal date has passed, you will then switch to the new terms and payment with that lender. On the other hand; if you decide to switch your mortgage to a new lender; it's time to gather the necessary documents. Your broker will provide you with a list of documents required for the switch process. This typically includes recent pay stubs, employment letters, other relevant financial information and property documentation. There may also be an appraisal of your property required for the new lender to ensure the value is in line with what is expected. The switch process is more involved and may feature fees that the straight renewal doesn't; however, you may find that the savings far outweigh the cost. It is important that your broker calculates your savings and ensures that you actually will be farther ahead and saving money with the new mortgage when all fees and costs are included. In summary, the mortgage renewal process involves carefully reviewing your renewal offer and comparing it with other options available to you to ensure that the mortgage still aligns with your financial goals; a process that is made easier with the help of a Mortgage Broker. It is recommended not to take the easy route and 'just sign' the renewal notice since you may not be offered the best rate and options that are available. The consultation with Mortgage Foundations and review of your options is no cost to you and in many cases their services are paid for by the lender; so, you really do have nothing to lose in the process. Remember, renewing your mortgage is an opportunity to reassess your needs and potentially secure better terms. Mortgage Foundations can help you understand the process and assist in exploring your options, so you can make informed decisions that align with your financial goals.

The First Home Savings Account (or FHSA) is a government program designed to help Canadians save money for purchasing their first home. It's a special type of registered savings account that allows you to deposit money on a tax-free basis, with the added bonus of earning tax-free income on the investments within the account. This program combines the advantages of an RRSP and a TFSA by reducing your annual taxable income while allowing you to generate tax-free income on the amount you save. Now, let's talk about the benefits of the FHSA. Foremost, the tax advantages are a major plus. By contributing to this account, you can reduce your taxable income and potentially receive a higher tax refund. This means more money in your pocket to put towards your dream home! Additionally, the FHSA offers some flexibility when it comes to contributions. You can contribute up to a certain limit each year, which is determined by the government. However, if you don't use the full limit in one year, you can carry forward the remaining contribution room to future years. This can be especially beneficial if you have fluctuating income or if you're not able to save as much in a particular year. Just like an RRSP, any contribution up to your annual limit will reduce your taxable income and will likely result in an increased tax refund (or reduced tax amount owing); however, unlike an RRSP, the contribution deadline is Dec 31st of each year instead of by the end of February the next year. Another advantage of this account is that you can invest the funds to potentially earn higher returns. Unlike a regular savings account with limited interest, the FHSA allows you to invest in a variety of eligible investments including mutual funds, stocks, bonds, and GICs. This gives you the opportunity to grow your savings faster and maximize the potential for a larger down payment on your first home. Furthermore, the FHSA allows you to withdraw funds when you're ready to purchase your first home. The withdrawals are tax-free as long as they are used for qualified housing expenses, which include the down payment, closing costs, and certain other expenses related to buying a home. This can be a significant benefit, as it means you have more money available to put towards these costs, ultimately reducing the amount you need to borrow and potentially saving you thousands of dollars in interest over the life of your mortgage. It's also worth mentioning that the FHSA can be used in combination with other existing government programs for home buyers like the Home Buyers' Plan; which allows you to withdraw money from your registered retirement savings plan (or RRSP) to purchase or build a qualifying home. By combining these two programs, you can potentially have even more funds available for your down payment, making your dream home even more achievable. It should be noted that unlike the RRSP Home Buyers' Plan; the amount withdrawn from the FHSA does not need to be repaid and if you are not using them to purchase a property, they can be transferred to your RRSP or RRIF. To be eligible to participate in the FHSA you must be a Canadian Resident, be legal age in your province of residence, be younger than 71 as of December 31st of the current year and must not have had a qualifying home in Canada as your principal place of residence that you or your spouse owned during the part of the calendar year preceding the opening of the FHSA or during the preceding four calendar years. For clarity, as of January 2024 if you (or your spouse that you resided with) owned a home at any time from January 1st 2020, you would not qualify. In summary, the Canada First Home Savings Account offers several benefits for Canadians looking to save for their first home. The tax advantages, flexibility in contributions, and potential for higher investment returns make it an attractive option. Plus, the ability to withdraw funds tax-free for qualified housing expenses provides significant financial assistance when it comes time to make that all-important home purchase. So, if you're dreaming of owning your first home, the Canada First Home Savings Account may be just the tool you need to make that dream a reality!