Many Ontario homeowners think they're facing significant financial challenges as their mortgages come up for renewal at interest rates higher than those from four or five years ago.
But are they?
Barrie mortgage broker Della Dwyer told Barrie 360's What Barrie's Talking About podcast there are options.
Dwyer’s research indicates that in 2024, approximately 11,000 Ontario mortgage holders missed a payment, and that number is expected to rise in 2025. The key takeaway: Homeowners need to be proactive. "If you’re struggling, reach out to your mortgage lender before missing a payment." Lenders may have options to help before the situation becomes dire."
The financial impact of renewals in the coming months could be substantial, says Dwyer. For instance, a homeowner who took out a $434,000 mortgage in 2020 at a 2.5% interest rate with a 25-year amortization would have been paying around $1,944 per month. As that mortgage renews at a 4.44% rate, their balance would be approximately $367,000, and their payment could increase to $2,411—an additional $468 per month.
However, there are strategies to mitigate the impact. One option is to extend the amortization back to 25 years upon renewal, which would bring the new payment down to around $2,041, reducing the increase to just $97 per month. While this means paying less to the principal, it can provide much-needed cash flow relief.
Dwyer recommends homeowners start planning at least six months before their renewal. Testing whether they can handle the higher payment for a few months in advance can help determine if additional adjustments are necessary. If affordability is a concern, homeowners should explore refinancing or switching lenders.
For those with insured mortgages (those with less than 20% down at purchase), there may be additional options. "There are programs in place through mortgage insurers like CMHC, Sagen, and Canada Guarantee that can assist borrowers struggling with payments," Dwyer explains.
The broader market context also plays a role. House prices have declined by 23% in cities like Toronto and London, and those who purchased pre-construction homes with the intent to sell before completion are facing losses.
Dwyer’s final piece of advice is clear: don’t wait until the last minute. "Many people contact me less than 30 days before their mortgage renewal. If you can, start at least four to six months ahead. That way, you have time to shop around and secure the best rate possible."
For homeowners looking for guidance, reaching out to a mortgage broker can provide access to a range of lenders and potentially more competitive rates than traditional banks offer. As the mortgage landscape continues to shift, staying informed and proactive is crucial for financial stability.
