As mortgage renewal season approaches, many Canadian homeowners are facing critical financial decisions. With the Bank of Canada recently reducing its overnight lending rate to 2.75%, this shift presents new opportunities for those renewing their mortgages to secure better terms and optimize their financial situation. However, with ongoing economic uncertainty, rising living costs, and evolving housing trends, many homeowners are weighing their options carefully. Some are considering downsizing, relocating, or even renting out part of their home to better manage expenses and maximize their financial flexibility.
If you’re approaching your mortgage renewal and wondering which path is right for you, this guide will walk you through key considerations to help you make an informed decision.
Understanding Mortgage Renewals vs. Refinancing
One of the most common questions homeowners ask is, Is a mortgage renewal the same as a remortgage? The short answer is no. A mortgage renewal occurs when your current mortgage term ends, and you agree to new terms with your existing lender. On the other hand, refinancing means replacing your existing mortgage with a new one—often to secure a lower interest rate or access home equity. With the Bank of Canada recently lowering its overnight lending rate to 2.75%, homeowners may find refinancing a more attractive option if it means securing better terms. If you’re unsure whether to renew or refinance, consider your financial goals and whether your current lender is offering competitive terms.
Key Considerations When Renewing Your Mortgage
1. Can I Negotiate My Mortgage Renewal?
Yes! Many homeowners simply accept their lender’s first offer, but negotiating can help secure a lower interest rate or better terms. Shopping around and negotiating terms can lead to better interest rates and conditions.
With the Bank of Canada’s interest rate cut, lenders may be more flexible, especially if you have a strong payment history. Compare multiple offers to ensure you’re getting the best deal. Speak with multiple lenders, use mortgage brokers, and leverage the lower rate environment to secure the best possible deal.
If you’re facing financial strain, refinancing or negotiating new terms could provide much-needed relief. Refinancing allows you to replace your existing mortgage with a new one—potentially securing a lower interest rate, extending the amortization period to reduce monthly payments, or even consolidating debt.
For example, if your current mortgage rate is 5% but lenders are now offering 4%, refinancing could save you thousands over the loan term. However, this strategy depends on factors like penalties for breaking your current mortgage, your credit score, and lender policies. Alternatively, negotiating a renewal with your existing lender—rather than automatically accepting their first offer—can sometimes result in better terms, especially if you have strong credit and a history of on-time payments.
2. What Is the Difference Between Refinance and Renewal?
If your current mortgage doesn’t meet your needs, refinancing might be a better option. Refinancing allows you to adjust your loan amount, interest rate, or repayment schedule. This can be beneficial if you need to access home equity for renovations or consolidate debt at a lower interest rate.
What If You’re Renewing Your Mortgage While Unemployed?
For those experiencing financial hardship, renewing a mortgage when unemployed in Canada can be challenging. Lenders assess your income, credit history, and overall financial stability when determining eligibility.
If you’ve lost your job or have reduced income, consider options such as:
- Speaking with your lender about flexible repayment terms.
- Exploring co-signing options with a trusted family member.
- Renting out a portion of your home for additional income.
- Downsizing to a more affordable property.
3. Should I Downsize My House?
With home prices fluctuating, some homeowners are considering downsizing to reduce mortgage payments, free up equity, or move to a more affordable area. According to Royal LePage’s recent study, 1 in 10 Canadian homeowners renewing their mortgage in 2025 are considering downsizing or relocating. This can be a strategic move, especially for empty nesters or those seeking lower living costs.
Downsizing can be a smart financial move, particularly if:
- Your current home no longer suits your needs.
- You want to reduce expenses, such as property taxes and maintenance.
- You’re looking for a more convenient location or a home with better amenities.
For homeowners looking to leverage into their home’s equity, downsizing or relocating can be an ideal solution. Selling a larger, higher-maintenance property and moving into a more affordable or strategically located home can free up capital, reduce property taxes, and lower utility costs.
For instance, if you currently own a four-bedroom home but your children have moved out, downsizing to a smaller home could unlock equity that can be used for investments, retirement savings, or other financial goals. Likewise, relocating to a lower-cost housing market—such as moving from a major city to a suburban or rural area—can dramatically reduce expenses while still maintaining a comfortable lifestyle.
Downsizing can lead to lower mortgage payments, reduced upkeep costs, and increased financial flexibility.
If you’re considering downsizing, explore MLS Listings under $350,000 to find budget-friendly properties that match your lifestyle.
4. Exploring New Homeownership Opportunities
If you’re considering a move, the current market presents exciting opportunities. Whether you’re looking for Ottawa Waterfront Homes for Sale or exploring MLS Listings under $500,000, strategic home shopping can help maximize your investment in a changing market.
5. Exploring Rental Income Opportunities
Another viable option for offsetting mortgage payments is leveraging your property for rental income. If your home has an unused basement, an extra bedroom, or even a separate unit, converting it into a rental space can generate passive income to help cover your mortgage. This strategy is particularly useful for homeowners who want to retain their property but need additional cash flow.
For example, if your mortgage payment is $2,500 per month and you can rent out a basement suite for $1,200, you’re effectively cutting your out-of-pocket expenses in half.
For those considering investing in a rental property, Ottawa Waterfront Homes for Sale can present unique opportunities. Waterfront properties in desirable locations can attract long-term tenants, vacation renters, or professionals looking for premium rentals. Whether you’re considering short-term Airbnb rentals or long-term lease agreements, investing in a waterfront home with rental potential can be a smart financial move, provided you factor in market demand, property management, and zoning regulations.
Making an Informed Decision
With more than half of Canadians expecting their mortgage payments to increase upon renewal (Royal LePage Survey), understanding your options is crucial. Rising interest rates in recent years have led many homeowners to seek solutions that help them navigate higher mortgage costs while maintaining financial stability.
Leveraging the Current Interest Rate Environment
If you’re in a strong financial position, now may be a strategic time to lock in a favorable mortgage rate. With the Bank of Canada lowering the overnight lending rate to 2.75%, some lenders are offering more competitive rates than before. By renewing at a lower rate or negotiating with lenders, you could secure significant long-term savings.
For example, if you originally secured a mortgage at 5.5% but can now renew at 4%, the difference in monthly payments could be substantial. This strategy is especially beneficial if you plan to stay in your home long-term and can take advantage of lower borrowing costs.
Final Thoughts
Whether you’re planning to negotiate better mortgage terms, explore downsizing, or use your home as a rental property, staying informed about market trends is crucial. The recent interest rate cut presents a unique opportunity to reassess your mortgage options. With careful planning, you can make the best financial decision for your future.
If you’re considering a move, check out our latest Ottawa Waterfront Homes for Sale and MLS Listings under $500,000 to find the right home for your needs.
For expert advice tailored to your situation, connect with a real estate professional today!