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How to Renew Your Mortgage in 2022

Jon Jilani

Is your mortgage up for renewal in 2022? If it is, you might be one of the thousands of Canadians worrying about renewing your mortgage during this period of rapidly rising interest rates. Ratehub.ca did the calculations to see what Canadians can expect will happen to their monthly mortgage payments upon renewing in November 2022. Read on to learn more about what we found.

Your mortgage payment is going to increase

If you are a homeowner renewing your mortgage in November 2022, the best fixed mortgage rate you’d have received five years ago would have been 2.69%. Today, the best 5-year fixed mortgage rate you’ll be able to access at renewal is 4.89%. 

According to Ratehub.ca's mortgage payment calculator, if you put a 10% down payment on a $500,000* home back in November of 2017, with a 5-year fixed rate of 2.69% amortized over 25 years (total mortgage amount of: $463,950), you would have a monthly mortgage payment of $2,122 until your upcoming renewal date.

When renewing in November 2022, you would have a mortgage balance of $394,170 (assuming you haven’t made any lump-sum payments), a 5-year fixed rate of 4.89% and a new monthly mortgage payment of $2,567

Upon renewal, you’ll be paying an additional $445 per month (a 21% increase), or $5,340 per year on your mortgage payments.

*November 2017 average home price in Canada was just under $504,000 (CREA)

What does this mean for you? 

“Households with fixed rates up for renewal in the coming months will see their monthly mortgage payment jump substantially,” says James Laird, Co-CEO of Ratehub.ca and President of CanWise mortgage lender. Consequently, you may have to tighten your belt and cut back on other household expenses. 

This doesn’t mean that you need to start panicking. “As long as the income profile is similar to what it was five years ago, the household should be able to manage the higher payment. It is important to note that anyone who got a mortgage five years ago would have passed the stress test rate of 4.99%, which means making the payment should still be possible, but could be painful," added Laird.

In an ideal situation, your household’s income will have increased over the last five years, making it less stressful for you to handle the higher cost of your mortgage today.

What should you do if your mortgage is coming up for renewal?

While the renewal process may seem a little daunting, here are some tips to help you get the best rate at renewal time:

  • Prepare ahead of your renewal date: Your current lender will send you an early mortgage renewal offer 120 days (or more) ahead of your renewal date. The rate your current lender will offer you is often not the best in the market, as they are hoping you will just sign the letter out of convenience instead of shopping around. However, shopping around is exactly what you should do. You are under no obligation to renew with your current lender. At 120 days before your renewal date, many lenders can hold a mortgage rate for you, so you should compare what’s currently available in the market. If you want to stay with your current lender, make sure to negotiate so they offer you the lowest rate being offered to you by other lenders. You should also be open to switching lenders, as this is often the best way to get the lowest mortgage rate. Many lenders will even cover your switching costs.  

  • Consider your financial goals: A lot can happen in half a decade, so be mindful of what your goals and expectations are for the coming five years. For example, if you’re planning to start a family, pay for a child’s university tuition or have another major financial commitment coming your way, you’ll want to factor that in. Make sure that the mortgage product you choose aligns with your financial goals. It may be helpful to make a list of features that you’re looking for in a new mortgage product, such as portability and pre-payment options. A mortgage broker can help you select the best product for your household’s needs. 

  • Contact a mortgage broker: A mortgage broker is basically a one-stop shop for mortgages, with access to the best rates from the Big Banks, credit unions and top mortgage lenders in Canada. A mortgage broker will do the negotiating for you, can hold a rate for you up to 120 days before your renewal date (so that you are protected from any rate increases during that rate hold period) and can guide you through the entire application and switching process, making it smooth and easy. Best of all, it's completely free to use a mortgage broker and good mortgage brokerages pass their promos, savings and discounts on to you.

The bottom line

While your monthly mortgage payment will most likely increase upon renewal, if your household finances have remained the same as when you first got your mortgage, you should be able to manage a higher mortgage rate at renewal. In the rapidly rising rate environment of 2022, shopping around is critical to ensuring you get the lowest mortgage rate at renewal. To save yourself the hassle of having to negotiate, speak to a mortgage broker who can provide you with expert, personalized advice and help you handle any necessary paperwork.

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