By Jasmin Brown

BDO Debt Solutions

Mortgages Coming Due

Feb 9, 2024 | 9:47 AM

“The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of Pattison Media and this site.”

A recent report released by Royal LePage tells us that approximately 3.4 million Canadians will be looking to renew their mortgage within the next 18 months. The same report also indicates that many Canadians are concerned about their renewal, which is what we are hearing from people everyday. Various surveys are indicating people are worried about their ability to afford their payments after renewal, and even about the prospect of potentially having to sell their homes. Some Canadians are indicating that they already can’t afford their homes.

Variable Rate vs. Fixed Rate Mortgages

A variable rate mortgage is a home loan where the interest rate is affected by changes in the prime lending rate. Variable rate mortgage holders have been struggling with payments ever since we began to see the post-pandemic increases in interest rates. Some have seen increases in payments upward of $2,000 per month just to cover the cost of their mortgage.

A fixed rate mortgage is a home loan where the interest rate remains constant throughout the term of the mortgage. This means that the payments are set in advance, so you know what you will pay every month. A fixed rate mortgage payment is much easier to budget for because it is a set amount. However, during the pandemic, many people took advantage of locking in at the very low interest rates, and they are very likely to experience sticker shock when renewing in the current higher rate environment.

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Renewal vs. Refinance

The question is whether you should renew or refinance your home loan when it comes due. Renewal is typically the easiest route, and you won’t be required to redo the mortgage stress test. However, you will have to accept what your bank is offering instead of potentially taking advantage of a lower rate with a different lender. A renewal may also allow you to extend your amortization period in order to lower the monthly payment, however, you still could end up paying more interest in the long run. If you choose to refinance, you may be able to take advantage of lower interest rates, because you can shop around. However, you will be required to pass the mortgage stress test and fill out a new credit application. We recommend meeting with your bank and/or a mortgage broker well in advance of your renewal date to learn your options. Make sure that you understand any fees and penalties that may be involved with a renewal or with refinancing.

Insolvency Proceeding Can Help You Stay in Your Home

Many Canadians have more than just mortgage debt. A recent Equifax survey tells us that average non-mortgage debt is currently $21,013 in Canada, and slightly higher here in Saskatchewan at $22,098. If you are struggling with non-mortgage consumer debt, reach out to a Licensed Insolvency Trustee. They will discuss your options with you for free. Although there are many myths around federally regulated insolvency proceedings such as bankruptcy, a formal insolvency proceeding could very well allow you to stay in your home. Funds being paid toward non-mortgage consumer debt can be freed up and put toward your mortgage payment or used to start an emergency fund or savings account.

If you are having trouble making ends meet each month, finding the right debt solution can help. Visit the BDO Debt Solutions website for more information, or call 1 855 BDO DEBT to book a free, no obligation consultation.

Jasmin Brown is a Senior Vice President overseeing the insolvency practice in Saskatchewan. She is committed to providing creative and practical debt solutions with empathy, understanding and professionalism to help people overcome their financial difficulties.