Refinance today before you can’t tomorrow

Alright, let’s talk mortgages. Because right now, for a lot of Canadians, that word “mortgage” isn’t exactly synonymous with “sweet dreams and financial freedom.” No, for far too many, it’s becoming a four-letter word that brings with it a whole lot of anxiety.

I’ve been in this business a long time, seen a lot of market cycles. But what we’re witnessing today is something else entirely. The sheer volume of people hitting their mortgage renewal dates with rates dramatically higher than what they signed up for just a few years back? It’s unprecedented. The “payment shock” isn’t just a buzzword; it’s a gut punch for a massive percentage of Canadian households.

Think back to 2020, 2021. Interest rates were practically giving money away. We saw fixed rates dipping below 2%, variable rates even lower. People bought homes, stretched their budgets, maybe even consolidated a little bit of debt with that sweet low-rate mortgage. Life was good, financially speaking.

Fast forward to today, August 1, 2025. The Bank of Canada, after a series of cuts that brought the overnight rate down to 2.75%, has held steady since March. While that’s a small sigh of relief compared to the peak, it’s still a world away from those pandemic lows. We’re seeing 5-year fixed rates around 4.39%, and variable rates around 4.45%. Now, those aren’t horrible rates historically, but when you’re jumping from 1.5% or 2% to nearly 4.50% on a half-million-dollar mortgage, the math gets brutal.

The Bank of Canada itself has been sounding the alarm. They’ve reported that around 60% of Canadian mortgages are set to renew in 2025 and 2026.¹ Sixty percent! And for a good chunk of those, especially those with fixed rates from the low-interest era, we’re talking payment increases of 15% to 20% on average. Some variable-rate holders who haven’t adjusted their payments could be looking at even steeper jumps to get back on track with their amortization.

Imagine this: You’ve budgeted for years for a $2,000 monthly mortgage payment, and suddenly, without a major lifestyle change on your part, that jumps to $2,300, $2,400, or even more. That’s real money. That’s groceries. That’s gas. That’s RESP contributions for the kids. That’s the difference between managing and struggling. And for many, it’s leading to some very tough choices. We’re seeing people cutting back on discretionary spending, postponing renovations, even considering downsizing or taking on roommates just to make ends meet. It’s a sobering reality.

WHAT YOU SHOULD BE DOING NOW

But here’s where the conversation needs to shift from panic to proactive planning. The good news, and trust me, there is good news, is that more and more Canadians are waking up to the power of their mortgage – not just as a debt, but as a strategic financial tool. They’re realizing that sitting back and simply signing the renewal offer from their existing bank is often the most expensive mistake they can make.

This is where refinancing comes into play, and it’s not just for those in dire straits. It’s for anyone who wants to optimize their financial situation, especially in this higher-rate environment. And for those feeling that payment shock, it can be a lifesaver.

One of the biggest benefits we’re seeing people leverage is debt consolidation. Let’s be honest, carrying high-interest credit card debt, personal loans, or even a car loan at 8%, 10%, 15% or more, while also managing a mortgage, is a recipe for financial stress. Refinancing allows you to roll those higher-interest debts into your mortgage, effectively replacing multiple high-rate payments with one lower-rate mortgage payment.² The savings on interest alone can be staggering. Imagine turning a stack of credit card bills into an extra $300 or $400 in your pocket each month. That’s real cash flow improvement, and it can be the difference between treading water and finally starting to get ahead.

Now, I know what some of you are thinking: “But if I refinance, I’ll pay interest for longer, right?” And yes, that leads to the second major benefit people are exploring: extending their amortization to reduce monthly payments. This is a powerful, albeit sometimes controversial, strategy. If you’re coming off a 25-year amortization and only have 20 years left, extending it back to 25 or even 30 years (if your equity allows and you qualify) will undeniably result in paying more interest over the very long run. There’s no escaping that.

However, in times of significant payment shock, where every dollar counts, a longer amortization can dramatically reduce your monthly outlay, providing immediate and much-needed breathing room. It’s about managing cash flow now. For someone staring down a payment increase they simply can’t absorb, pushing that amortization back a few years can make the difference between keeping their home and being forced to sell. The key is to have a plan to potentially accelerate payments later when your financial situation improves. It’s a short-term tactical move, not necessarily a long-term strategy for everyone, but it’s a vital option for many struggling households.

And there’s one more important point you need to consider… property values.  A lot of the above depends on your property appraising high enough.  Even though we’ve heard property values have declined in recent years, I’m seeing most clients have enough equity to qualify.  This could change if our economy continues to struggle. My advice is not to wait.

The crucial takeaway from all of this is that you have options. And the best way to understand those options, and to tailor a solution that fits your unique situation, is to talk to an experienced, independent mortgage broker.

Why an independent broker? Because we work for YOU, not for a specific bank. We have access to dozens of lenders – the big banks, credit unions, monoline lenders – and we can shop around for the best rates and the most flexible terms. We understand the nuances of the market, the qualifying rules, and the various programs available to help you reduce your payments.

We’re seeing a wider array of solutions being offered by lenders. Don’t wait until you are in trouble. If your mortgage renewal is looming, or if you’re already feeling the pinch of higher payments, don’t bury your head in the sand. Don’t just accept the renewal offer your bank sends you in the mail. Be proactive. Take control.

Pick up the phone, find a trusted mortgage broker, and have an honest conversation about your financial goals and challenges. Let them crunch the numbers, explore all the avenues – whether it’s refinancing to consolidate debt, extending your amortization, or finding a combination of strategies. You might be surprised at the relief, the savings, and the peace of mind that a little professional guidance can bring.

Because in this new landscape of higher interest rates, simply hoping for the best isn’t a strategy. Planning, pivoting, and partnering with an expert is how Canadians are navigating this payment shock and moving forward, one sensible mortgage decision at a time. It’s time to empower yourself. It’s time to talk to a broker.

I hope you will enjoy this article and if you have any questions or would like to discuss I am always available.

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.