Worried you'll be stuck at renewal time?

Rates are higher. And qualification is harder.

If you can't qualify for a switch or refinance, you may be painted into a (mortgage) corner and have to renew at a higher rate. Can you find a way out to save some cash?

Dec 04, 2023

Updated from November 4, 2022


Don't wait for the paint to dry — here's some help.

The low, low rates days are over (we'll pause here for a moment of melancholy).

It's never been more important to find your best rate and options when it comes time to renew.

With today's higher mortgage rates, not only are you possibly looking at an increase of 2 to 4% to renew your 5-year fixed rate, but the current higher stress test may block you from qualifying with another lender.

If you can't qualify, you'll be stuck with your current lender and at the mercy of whatever renewal rate they feel like offering you.

Make sure to talk to us for your options — your budget may thank us!

The federal government recently released a new Canadian Mortgage Charter in Fall 2023 that outlines how banks can help your budget stress. Read the details here.

How can higher qualifying rates cancel your ability to switch to a lower rate?

At the start of your term, you likely qualified for your payments using the federal stress-test rate (considered high at the time).

Recent rate hikes have pushed that qualification ceiling higher. Lenders now have to ensure you can still afford your payments if rates go up another 2.0% (e.g. a 5-year fixed rate at 5.50% + 2.0% = 7.50% stress-test rate).

Even though you qualified the first time and you've been paying your mortgage on time, your 'new' Total Debt Service (TDS) ratio with the higher stress test may prevent your qualification this time, cancelling your ability to change lenders for a better rate or lower payments. (To renew with your current lender, you won't need to re-qualify.)

Find a way out to a better rate.

All is not lost. Check out the options below that may get you out of that renewal corner. And, as always — talk to an expert True North Mortgage broker anytime to strategize your details, no matter when your renewal may be coming up (get a helpful reminder here).

Have an insured mortgage? Switch to a better deal.

Your insured mortgage (if eligible) now doesn't have to face the mortgage stress test to switch lenders.

You'll be able to qualify at your mortgage contract rate (assuming the lender has implemented this recently highlighted government measure). That means you won't be held hostage to accept a higher offer where you are, and can look around for your best deal.

Go for the stretch (of your amortization).

Using our THINK Financial fixed-rate product as an example, if you have equity built up, one of our expert True North Mortgage brokers may be able to switch you to our lower fixed-rate product by stretching your amortization up to 25 years.

Stretching it out will lower your payments, which in turn can lower your debt ratios, allowing you to qualify for your mortgage amount for the switch.

Once the new mortgage is set up, you can then use your flexible pre-payment privileges to make extra payments on your mortgage to get your amortization caught up again.

Some things to note for this amortization-stretch strategy:

  • Incurred legal fees for collateral mortgage transfer of around $600-800
  • Appraisal may be required (True North would cover this fee)
  • Home must be valued under $1M at time of switch
  • Rate offered will depend on borrower details

There may be other requirements or other lenders that may work for you — talk to an expert broker for your full details.

In with the old (qualifying rules of your original insured mortgage).

You may think your mortgage is no longer insured against default. But if you haven't made any major changes, the insurance may still be intact.

  • Was your home purchased prior to October 17, 2016, and is the mortgage default insurance still valid (i.e., you haven't refinanced)?
  • Valid insurance may allow you to switch your mortgage (at renewal) to THINK Financial and use your contract rate to qualify instead of using the newer stress-test rules of an added 2%

Refinance to lower your payments.

If you can't make a switch, there's still some hope for lower payments — again by refinancing with your current lender to extend your amortization out to 25 or 30 years:

  • Typically an option for a mortgage with 20% or more paid down on your mortgage loan
  • Can only bring Loan-to-Value (LTV) to 80%, so you'll need enough equity built up for this option
  • Incurred legal fees of approx. $600-800
  • Appraisal will be required (True North covers this fee in most cases)
  • Typically not eligible for lowest-advertised rates

Put down a lump sum at renewal

Don't have a lot of amortization room? If you have access to extra funds, putting down a lump sum on your mortgage at renewal time may also afford you some flexibility to extend your mortgage length for lower payments. That way, if you can't switch for a better rate, you can still manage to eke out lower payments over your next term.

Want lower payments before renewal? If you've put down a lump sum, you may be able to recast your mortgage for instantly lower payments.

Go short? Term, that is.

Despite shorter-term rates being higher than the standard 5-year choice, some clients are choosing a shorter-term fixed rate (e.g. 2 or 3-year vs 5-year) — hoping to renew sooner into lower rates and still save, versus having to pay a penalty to break early (or pay today's rate for the entire 5 years).

Many Canadians (us included) are hoping and expecting rates to hike back down within the next year or two, with economists spying recessionary conditions on the horizon. (A recession typically causes the Bank of Canada to reduce its policy rate in response.)

If you choose a shorter term, make sure you have flexible pre-payment or payment-frequency options that allow you to pay more down on your principal before renewal — to help you get a lower rate or lower payments in case the economy doesn't cooperate and rates stay high.

Get temporary Rate Relief™

Available for a limited time for new purchases and switches, our innovative Rate Relief is a low-rate, 1-year or 6-month fixed product — and it may be the budget break you need for a few months of lower payments.

This short-term reprieve comes with the same great features as our other THINK Financial mortgages. Certain conditions and restrictions apply; please talk to our expert True North brokers to see if this renewal option is right for you.

What options do you have with a variable-rate mortgage?

With the majority of rate hikes (hopefully) behind us, talk to your expert broker about whether a variable rate makes more sense than a fixed-rate term this time around.

Have you managed to weather these latest hikes with an ARM or a VRM product (adjusting vs. fixed payments)? You may not see any budget relief with a VRM when rates drop, but you'll pay off your mortgage faster as the amortization ticks down.

Sticking with a variable rate may provide rate relief into your term, and you won't have to pay penalties to break a 5-year fixed term to take advantage of the lower rates.

Get unstuck, with great advice from a trusted expert.

Knowing the rate and mortgage options available to you, the pros and cons of a variable vs fixed mortgage rate, and your mortgage renewal-rights as a borrower can help empower you during a time of economic volatility.

Our friendly, knowledgeable True North Mortgage brokers are here to help you — and can offer debt-reduction strategies, other ways to save on your mortgage, and renewal options to make the most of your mortgage budget.

Give us a shout, anywhere you are in Canada. We can help clear a path at renewal time — online, over the phone, through our chat, or at one of our stores.

Get out of that corner and into a better mortgage.