Posted On Jan 15, 2026

For most of my career, my advice around mortgage renewals was simple and practical:

If your lender’s rate is competitive, just renew.

In more normal rate environments, that advice made sense. Switching lenders often meant legal costs, possibly an appraisal, and going through a full approval process — all for what might have been a modest rate improvement.

But I’ve had to rethink that advice.

Because these are not normal times.

Why Renewals Feel So Different Right Now

Two things are happening at the same time for many homeowners:

1. Payment shock at renewal

Many borrowers are renewing from mortgage rates around 2.25% into 5-year fixed rates around 4.50%.

2. Household cash flow is under real pressure

Over the past few years:

  • The cost of living has increased

  • Debt has accumulated (credit cards, lines of credit, auto loans)

  • Incomes, for many households, haven’t kept pace

As a result, simply renewing — without reviewing the broader picture — can quietly lock in financial stress.

A Critical Detail Many People Miss: What Actually Happens to Amortization

Let’s assume:

  • Original mortgage: $500,000

  • Original amortization: 25 years

  • Original rate: 2.25%

  • Original term: 5 years

After the first term, the remaining amortization is about 20 years.

At renewal:

  • Your lender cannot extend the amortization back to 25 years without triggering a refinance

  • A simple renewal keeps the remaining 20-year amortization

  • Any amortization extension — even with your current lender — requires a full refinance, with similar approvals and costs as switching lenders

This matters, because it limits how much relief a “simple renewal” can realistically provide.

What the Payment Change Looks Like in Reality

Before (original mortgage)

  • $500,000

  • 25-year amortization

  • 2.25%

Monthly payment: ~$2,170

After: Simple renewal at 4.50%

(Remaining 20-year amortization)

  • $500,000

  • 20-year amortization

  • 4.50%

Monthly payment: ~$3,150

That’s an increase of ~$980 per month, without borrowing a single additional dollar.

For many households, this is where the pressure begins.

Why “Just Renewing” Often Doesn’t Fix the Problem

At this stage, many homeowners hope that:

  • A slightly better rate will help

  • A small tweak will make the payment workable

But with higher rates and a shorter remaining amortization, renewal alone often leaves very little room to manoeuvre.

And there’s another, less obvious consequence.

The Hidden Cost of “Just Making It Work”

When mortgage payments rise sharply, the dollars that usually get squeezed out aren’t luxuries — they’re long-term priorities.

Often the first things to go are:

  • Retirement savings (RRSPs, TFSAs)

  • Children’s education savings (RESPs)

  • Emergency funds

  • Other meaningful short- and medium-term goals

Many homeowners can technically afford the higher payment — but only by putting important financial goals on hold.

That trade-off rarely shows up in a renewal letter.

Why This Matters More Than It Seems

A mortgage doesn’t exist in isolation.

When a higher payment absorbs more of your monthly income:

  • Long-term investing gets delayed “just for now”

  • Financial resilience weakens

  • Stress increases, even if payments are being made

Over time, the cost of pausing these goals can outweigh the interest savings from avoiding a refinance.

A Refinance Can Make a Meaningful Difference

A proper refinance allows you to:

  • Extend amortization (often up to 30 years)

  • Reshape payments around today’s realities

  • Consolidate high-interest debt, if appropriate

Refinance example (mortgage only)

  • $500,000

  • 30-year amortization

  • 4.50%

Monthly payment: ~$2,530

That’s still higher than before — but about $620 per month lower than a simple renewal.

Where Refinancing Often Makes the BIGGEST Difference: Debt-Consolidation 

Now let’s layer in something that reflects real life.

Before (after renewal)

  • Mortgage payment (4.50%, 20-year amortization): $3,150

  • Credit cards: $25,000 @ ~19% → $750/month

  • Line of credit: $20,000 @ ~9% → $400/month

Total monthly debt payments: ~$4,300

After refinance + consolidation

Assume:

  • Mortgage refinanced to include $45,000 of debt

  • New mortgage balance: $545,000

  • 30-year amortization

  • Rate: 4.50%

New mortgage payment: ~$2,760
Other debt payments: $0

The Cash-Flow Difference

 

Before

After

Mortgage

$3,150

$2,760

Other debts

$1,150

$0

Total monthly payments

$4,300

$2,760

Monthly cash-flow improvement: ~$1,540

That’s breathing room — without selling your home or sacrificing your goals.

A Fair Question: “Doesn’t Extending the Amortization Cost More Interest?”

Yes — that is true.

Extending amortization means:

  • It takes longer to pay off the mortgage

  • Total interest paid will be higher if you only make minimum payments

That trade-off matters and shouldn’t be ignored.

This Is About Stability and Flexibility — Not Giving Up

For many homeowners right now, the bigger risk isn’t paying more interest over decades.

The bigger risk is:

  • Being locked into a payment that no longer fits

  • Draining savings to keep up

  • Accumulating more high-interest debt

  • Living with constant financial pressure

Extending amortization can be a temporary stabilizing move — one that keeps you in your home and restores control.

You’re Gaining Options, Not Locking Yourself In

When you extend amortization through a refinance:

  • You lower your required payment

  • You regain control over cash flow

  • You are not forced to stay at that payment forever

Most mortgages allow:

  • Annual lump-sum prepayments

  • Increased regular payments

  • The ability to shorten amortization again at renewal

If your situation improves — higher income, lower expenses, paid-off debts, or a financial windfall — you can accelerate again.

The key is this:

You’re no longer contractually locked into a higher payment during a challenging period.

Why This Conversation Matters More Than Ever

A renewal notice presents one outcome.

A mortgage professional can:

  • Explain what renewal can — and cannot — do

  • Model refinance scenarios properly

  • Evaluate consolidation opportunities

  • Access multiple lenders and solutions

  • Reduce stress by guiding the process

The biggest risk today isn’t switching unnecessarily.

It’s auto-renewing and missing the opportunity to realign your mortgage with your life — while preserving flexibility for the future.

Final Thought

If your mortgage is coming up for renewal, don’t treat it as paperwork.

Have the conversation. Run the numbers. Then decide — confidently — whether renewing or refinancing truly makes sense for you.

Let's connect!

Ready to discuss your renewal and a Better Mortgage by Dom?

  • Call/text:  416 801-6616. Email: Domenic@BetterMortgagesByDom.ca

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