How to navigate (potentially) higher mortgage payments
Roughly 60% of Canadian mortgages will come up for renewal in 2025 and 2026.
If yours is one of them, you might be wondering if you’re in for a bit of sticker shock.
That’s because most of those mortgages locked in rates between 1.5% and 2.5% just 3 to 5 years ago.
While interest rates have been steadily trending downward in recent months, chances are they’ll still be higher than what you’ve been used to paying come renewal time.
And with higher rates comes bigger monthly mortgage payments.
Depending on the loan size and amortization period, you could be looking at a rise of 30% or more.
Let’s do the math:
- Original mortgage amount: $400,000 at 2% (25-year amortization)
- Current monthly payment: $1,693.80
- Renewal terms: $335,081 at 4.49% (average 5-year fixed rated as of Aug. 2025) on a new 20-year term
- New monthly payment: $2,110.60
- An increase of: $416.80
That’s a sizeable impact to anyone’s budget, no matter where on the pay grid you happen to be.
So, what can you do to mitigate the impact of a potentially higher monthly mortgage payment?
“One of the first things is to act immediately upon receiving your mortgage renewal statement,” says Jessica Dadswell, Educators Principal Broker – Mortgage Advisor. “This notice typically arrives 3 months before a mortgage term is set to expire—and believe me when I say you’ll need every second of those 120 days to figure out how to minimize the impact on your budget.”
That means not simply signing the automatic mortgage renewal that comes from your lender.
Jessica goes on to explain, “While it can be tempting to sign the automatic renewal for the sake of ease, that might not necessarily be your best course of action. Take the time to carefully review the terms and new interest rate being offered by your lender. If you’ll be facing higher monthly mortgage payments, run the numbers to see how that increase will impact your budget. And remember, your current lender is not your only option. This is your time to compare rates and options with other mortgage providers.”
You may also want to consider cost-saving strategies to help navigate higher mortgage payments.
Strategy #1: Extend your amortization
While it’s not ideal, stretching your amortization period (the timeframe in which you pay off the mortgage) spreads the total amount you owe over a longer period, reducing your monthly payment.
Using our previous example, let’s say you extended the amortization period back up to 25 years:
- Original mortgage amount: $400,000 at 2% (25-year amortization)
- Current monthly payment: $1,693.80
- Renewal terms: $335,081 at 4.49% (average 5-year fixed rated as of Aug. 2025)
- New monthly payment: $1,852.72 (re-amortized at 25 years)
- An increase of: $158.92 (over 50% less than if you were to leave the amortization the same)
Taking this one step further, instead of 25 years, let’s say you extended the amortization period to 30 years:
- Original mortgage amount: $400,000 at 2% (25-year amortization)
- Current monthly payment: $1,693.80
- Renewal terms: $335,081 at 4.49% (average 5-year fixed rated as of Aug. 2025)
- New monthly payment: $1,687.58 (re-amortized at 30 years)
- A decrease of: $6.22 (effectively keeping your payments the same as your previous term)
Keep in mind, however, that adopting this strategy means paying more interest over the duration of the mortgage loan and you’ll need independent legal advice ($900 to $1500). So, be sure to weigh short-term cash flow advantages versus long-term effects.
Run your own numbers using our handy mortgage payment calculator
Strategy #2: Refinance/consolidate debt
If you have other high-interest debt (credit cards, car loan, etc.), consolidating everything into one new mortgage loan could lower the overall monthly burden of servicing all that debt—and minimize (or even cancel out) the financial impact of higher mortgage payments. That’s because instead of having to make multiple monthly payments at varying interest rates, you’d be making just the one (payment).
How refinancing your mortgage could help you save money, increase cash flow, and reduce debt
But what strategies can you implement if you’ve still got some time until your mortgage renewal?
“If you’re locked in at a lower rate than what’s currently available out there, you’ll most likely want to ride it out until your mortgage comes up for renewal,” continues Jessica. “However, there are also cases where people had to renew a year and half ago, at the peak of when interest rates were at their highest. In that situation, breaking your current mortgage could be a viable option—particularly if your cash flow is being squeezed to the max. While breaking a mortgage comes with certain penalties, it might actually make financial sense considering interest rates have dropped significantly since then. Naturally, before making any decisions regarding your mortgage, be sure to reach out for professional, educator-specific advice.”
Value of advice: when it comes to breaking your mortgage
Navigating potentially higher mortgage payments is also something you should be thinking about (and actively planning for) beyond renewal time.
After all, change is the only constant.
Interest rates will rise and fall. Financial crises will come and go.
Your best defense through it all is to always be one step ahead.
Here are two easy ways you can do that:
#1: Maximize mortgage prepayment privileges
Many mortgages allow for the option of prepaying a portion of the principal each year. Doing this consistently will reduce the amount of the loan that’s subject to the higher interest rate at renewal time. That’s why it’s important to discuss prepayment options with your lender prior to signing a mortgage contract.
#2: Accelerate your mortgage payments
By sticking with your regular monthly mortgage payments, you’re accruing maximum interest on the principal amount over the course of those 30 days. Switching to an accelerated weekly or bi-weekly payment schedule would chip away at the principal a whole lot faster, leading to lower interest accumulation. That would result in paying off your mortgage quicker and cheaper (as it would cost you a lot less interest over time). In both cases, not only would you be paying down the principal faster, but you’d also be building up greater equity. The benefit of which means having access to emergency funds you can borrow for debt consolidation.
At the end of the day, the road to paying off your mortgage should be viewed as a journey, versus simply a destination.
Educators Financial Group is here to help you navigate that journey, every step of the way.
Whether it’s how to ease the financial burden of higher monthly mortgage payments or what steps you can take to realize your goals for the future, count on us for the educator-specific advice you need to live the life you deserve.
Get ahead of your mortgage renewal (and potentially higher rates) by speaking with us now
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