Renewing in 2025? 

A high percentage of the Canadian population are approaching mortgage renewal in 2025. Those who are renewing could be facing increased interest rates of 1%-2.5% higher then their current rates. Especially if you are locked in for a five year fixed back in 2020. 

Renewing a mortgage may seem like a daunting task, as there have been many changes to the Canadian mortgage market. This year will be a massive year for renewals with over $300 Billion in mortgages are set to come for a renewal. As 1.2 million Canadians are bracing for impact as the likelihood of your mortgage interest increasing is almost certain ! 

What to Expect in 2025:

In 2025 we are expected to see mortgage renewals to be set with higher rates! In 2020, If you either purchased a home or saw an opportunity to take advantage of the historic low rates to refinance or remortgaging at a 5 year fixed mortgage rate sitting at a high 1% to a low 2 % . This year as these 5 year terms are coming up for renewals and rates are looking to be much higher. If you are looking to lock in a 5 year fixed term, your interest rate doubled at the mid to high 4% interest rate. This change could cost the average homeowner hundreds of dollars a month on their mortgage. 

Let’s Break it down: 

If we take for example in 2020 for a $400,000 mortgage locking in a 5 year fixed rate of 2.2% and amortizing the payment period 25 years. Their monthly mortgage payment would be $1,732.66. If you were to take that same example for today’s market at 4.5%. Their monthly mortgage payment would be $2,213.89 A difference of $481.23. Per month, $5,774.76 a year! As thousands of homeowners brace for impact, there are options and opportunities here if you have an open mind, and are able to pivot to use your mortgage to your advantage! 

Canadian rates have been on the steady decline in the later half of 2024. To put things into perspective, at this time last year a five year fixed term was sitting mid 6% now mid 4%. As we expect this trend to continue, it will not be at the pace of the previous 6-8 months. Many experts say we could drop another 25 to 50 basis points this year 2025. This is great news moving forward. Now unfortunately we will not see the glorious rates of 2020. We must focus on the bright side. The imminent is coming so we must prepare ourselves to take advantage of the situation. Here is how we can make the best your new mortgage in 2025. 

How to Prepare For the Impact of Renewing 2025? 

1. Start Early: If you are an individual approaching your mortgage renewal, it is best to start this process early. How early? 120,180 days before the end of your term depending on the lender. 
2. Acquire a Rate Hold: This is what you are guaranteed from a lender with a specific rate will be available for a set period of time ( Generally 120 days ). This time will give you time to plan and budget for the new mortgage rate.  
3. Talk To a Mortgage Broker/ Agent: They will have access to multiple lenders, finding you a mortgage strategy that would best for you. Often they will have volume discounts from major lenders. Since they only get paid by the lender when the contracts gets signed, their services are free for you. 
4. Shop Around: Your current lender might not be your best option. Beginning this process early will allow you time to find a lender with a lower rate, better plan or allow more flexibility. Talk to a mortgage broker to allow them to do this work for you. 
5. Consider a Short Term Fixed Rate:  with rates expected to drop even further in the next few years. Aiming to catch them on the downward trend could be a quick fix to gain more cash flow
6. Extend Your Amortization Period: If you feel that the higher payments of renewing in 2025 are undaunting. Take a look at extending your amortization to lower your monthly payments. This on the flip side increases you interest you’ll pay over the duration of your mortgage. It is an easy temporary solution to keep you expenses in check. 
7. Refinancing: This option could allow breathing room, accessing equity from your home to give you cash in hand to cover higher mortgage payments could be a short term solution. If you Refinance on the renewal date, you also face no penalties. If you are thinking of updating your home, have a child ready for post secondary or another big expense you are planning on. This option will allow you to access capital for higher payments. 
8. Variable Rate: As there is much expectation that rates are going to slowly lower over the next few years. If you are able to cover the higher payments with expectation of them lowering. A short term variable rate might be a great option for you. 

Take Away: 

The biggest take away from this is to understand that you have options. There are many ways to take advantage of what you have access to. Each home, client, and family have different goals, strategies and risk tolerance. Advising a mortgage broker to help you navigate through this time could save you thousands. The earlier we chat, the easier this princess will be to better prepare yourself for the future of your home.