As the Canadian housing market continues to navigate rising interest rates and changing financial landscapes, RBC’s recent Q4 earnings call shed light on a significant challenge for homeowners: mortgage renewals in 2025 are expected to bring a $513 average monthly payment increase for their clients. This is a wake-up call for many homeowners, emphasizing the importance of taking proactive steps when their mortgage renewal approaches.
If you’re among those whose mortgage term is set to expire in the coming years, it’s time to consider a smarter alternative to simply signing your lender’s renewal offer. Refinancing your mortgage to extend the amortization and consolidating high-interest debt could provide much-needed financial flexibility and a buffer against future financial stress.
The Challenges of Renewal in 2025
According to RBC, a combination of factors, including higher interest rates and shorter amortization periods for many mortgages, is driving significant increases in monthly payments at renewal. For many homeowners, an extra $500 or more per month could be financially crippling, especially when paired with other rising costs of living.
Without careful planning, this could lead to increased delinquency rates, strain on cash flow, and a ripple effect on your overall financial health.
Why Refinancing Is a Better Option?
1. Extend Your Amortization for Lower Payments
When you refinance, you can extend your mortgage’s amortization period (the time it takes to fully repay the loan). This reduces your monthly payments by spreading them out over a longer period. While you may pay more in interest over the life of the mortgage, the immediate reduction in monthly expenses can ease your financial burden significantly.
2. Consolidate High-Interest Debt
Carrying high-interest debts, such as credit card balances or personal loans, can make cash flow management even harder. Refinancing allows you to roll those debts into your mortgage at a much lower interest rate, saving you money and simplifying your finances with a single monthly payment.
3. Unlock Equity for Financial Flexibility
With Canadian home values remaining relatively stable, many homeowners have built up equity in their properties. Refinancing lets you tap into that equity, providing funds to cover unexpected expenses, invest in upgrades, or build a financial cushion during uncertain times.
4. Tailored Solutions for Your Needs
Refinancing at renewal allows you to revisit your financial goals with the help of a mortgage advisor. Whether it’s locking in a fixed rate for stability or choosing a variable rate for potential savings, you can structure your mortgage to align with your unique situation.
Comparing Renewal vs. Refinancing
| Feature | Renewing Mortgage | Refinancing Mortgage |
|---|---|---|
| Monthly Payment Impact | Higher payments due to rising interest rates | Lower payments possible by extending amortization |
| Debt Consolidation | Not an option | Allows combining high-interest debts into the mortgage |
| Access to Home Equity | Not available | Can unlock equity for additional flexibility |
| Rate Negotiation | Limited, often less competitive rates | Full access to market rates and options |
A Strategy to Prevent Delinquencies
By proactively managing your mortgage renewal with refinancing, you not only reduce your immediate financial strain but also position yourself to avoid falling behind on payments. Preventing delinquencies is critical—not just for your credit score but also for maintaining your overall financial health.
Extending your amortization and consolidating debts ensures that your cash flow remains balanced, giving you the breathing room you need to navigate future economic uncertainties.
How to Get Started
Review Your Financial Situation: Begin by assessing your current income, expenses, and outstanding debts.
Talk to a Mortgage Advisor: Seek expert advice to explore refinancing options tailored to your needs.
Act Early: Don’t wait until the last minute to decide. Starting the process a few months before renewal gives you time to weigh your options and secure the best terms.
Final Thoughts
RBC’s insights into rising monthly payments should serve as a call to action for all Canadian homeowners. Rather than automatically renewing your mortgage, consider how refinancing can be a strategic tool to manage cash flow, reduce financial stress, and prepare for the future.
At Mortgage Fernando Inc., we specialize in helping homeowners find solutions that align with their financial goals. Whether it’s extending amortization, consolidating debt, or finding the best rates, we’re here to guide you every step of the way.
Book a consultation today and take control of your mortgage renewal strategy!