Beyond the Rate: A Practical Look at Mortgage Renewals

There is a lot of noise right now around rates, inflation, renewals and what it all means for homeowners. To help make sense of it, we wanted to share this update from a mortgage advisor, Toma Sojonky.

Toma’s perspective is practical and very timely: while rates matter, the bigger conversation for many households is cash flow. For anyone approaching a renewal, it may be worth looking beyond the posted rate and considering whether the mortgage can be restructured in a way that better supports everyday life.

STANDING PAT: THE BOC AND YOU

No changes to the Bank of Canada’s Policy rate, ergo no changes to your lender’s Prime rate (4.45%). That means, status quo on the rate/payment for your variable mortgage and HELOC. Of course, your fixed rate mortgage is unaffected.

War, oil and tariffs all have bond traders betting this morning that inflation is around the corner. Five-year yields are up, so new fixed mortgage rates shouldn’t be far behind. 

In standing pat with their Policy rate today, the BOC said they are “looking through the war’s immediate impact on inflation but will not let higher energy prices become persistent inflation.”

So, yeah; let’s selfishly hope for a quick end to the conflict…but it seems an increase may be on the horizon regardless – as this expensive gas splashes through Canada’s otherwise sputtering economy.

Renewal Remedies

The news above is just peachy for those renewing their mortgage in this environment. Someone who took out $500,000 at 1.99% five years ago started with a monthly payment of $2,115 amortized over 25 years. A renewal at say 3.99% makes your new payment $2,528.

A quick remedy? Well, you’ve borrowed the money; why not borrow some time? Stretching the amortization out to 30 years reduces the payment to $2,013. Going backwards may sound unappealing, but to me, it’s about manageable payments and preserving ownership...that’s YOU standing pat. Rate is impactful but let’s focus on where the rubber meets the road: household, after-tax cash flow.

Add a dash of debt consolidation and we are decimating third-party obligations like car payments and credit cards – only adding to your cashflow relief. We turned a client’s $900 car payment into a $40/month add-on to the restructured mortgage. Exhale!

We’ve been doing this all Spring and expect it to end in around 1.5 years when Canada’s “Renewal Wave” subsides. The key takeaway: well before that renewal letter shows up, don’t just think rate…remember it as the opportunity to restructure and get your house in order.

If you or anyone you know may want payment relief at renewal, share this email or utter my name!

Next BOC announcement is June 10.

Until then, take care,
Toma Sojonky - Mortgage Advisor
Verico Paragon Mortgage Inc.