As we move into 2025, Canadian homeowners renewing their mortgages may face a new reality: Higher interest rates compared to their initial mortgage terms. While this might seem daunting, it’s also an opportunity to reassess your financial situation and make decisions that align with your current goals. A mortgage renewal is more than just signing on the dotted line – it’s a chance to shop around, negotiate and take control of your financial future.

There are some essential tips and strategies to help you navigate mortgage renewals in today’s high interest rate environment. Whether you’re a first-time renewer or an experienced homeowner, these insights can save you money and reduce financial stress.

Why mortgage renewals matter in 2025

Mortgage renewals happen when your current mortgage term ends, and you need to secure a new term for the remaining balance. In 2025, many Canadian homeowners will be renewing at rates significantly higher than they locked in five years ago.

For context, mortgage rates in 2020 hit historic lows, with some fixed rates dipping below two per cent. Fast-forward to today, and fixed rates are hovering around four per cent or more, putting upward pressure on monthly payments. If your term is ending soon, it’s crucial to approach your renewal with a strategy to minimize financial impact.

Tips for navigating your mortgage renewal in 2025

Start early: Don’t wait until the last minute

Lenders generally send renewal letters two to four months before your renewal data, but waiting until then limits your options. Begin exploring renewal opportunities at least four to six months before your term expires. This gives you time to compare rates, shop around, and lock in the best deal.

Pro tip: Lenders allow you to secure a new mortgage up to 120 days before your renewal date that will be held until your renewal. If rates rise during this period, you’re protected. If rates drop, you can often negotiate own further.

Shop around for the best rate

While your current lender may offer convenience, don’t assume they’ll give you the best deal. Shopping around with other lenders or working with a mortgage broker can reveal competitive rates and terms. Mortgage brokers, such as our team at Homewise, in particular, have access to multiple lenders and can help you find a product tailored to your needs.

Why this matters in 2025: Higher rates mean even small differences in your mortgage rate can have a significant impact on your monthly payments and overall interest costs.

Consider extending your amortization period

If higher rates are stretching your budget, extending your amortization period could help lower your monthly payments. For instance, if you have 20 years left on your mortgage, you could extend it to 25 years, reducing your payment burden in the short term.

Things to keep in mind:

• While extending your amortization reduces monthly payments, it increases the total interest you’ll pay over the life of your mortgage.
• You can always shorten your amortization later or make extra payments when rates stabilize or your financial situation improves.

Evaluate your financial goals

Mortgage renewals are a great time to reassess your financial goals. Are you planning to stay in your current home long-term, or are you considering selling in the near future? Your plans can influence whether you choose a fixed or variable rate, the length of your term, and other features such as prepayment flexibility.

Fixed vs. variable in 2025:

• Fixed rates offer stability in today’s uncertain environment.
• Variable rates might still be attractive for those expecting rate cuts later in the year but come with more risk if rates remain high.

Negotiate with your current lender

Don’t accept your lender’s first renewal offer without negotiation. Many lenders are willing to match or beat competitive offers, but they won’t do so unless you ask. Use quotes from other lenders or brokers to leverage a better rate or more favorable terms.

Take advantage of prepayment options

If you’re in a position to do so, making a lump sum payment or increasing your monthly payments before or during renewal can help reduce your principal and save on interest over time. Many lenders allow up to 15 to 20 per cent of your original principal to be paid off each year without penalties.

What to watch for in 2025

• Rising household debt: Higher rates mean higher payments, so consider your overall debt load and budget carefully.
• Inflationary pressures: Inflation could influence rates further, so stay informed about market trends.
• Government policies: Keep an eye on government announcements or programs aimed at easing affordability challenges, such as first-time buyer incentives or stress test changes.

Key takeaway: Be proactive

Mortgage renewals in 2025 come with unique challenges, but with the right strategies, you can minimize financial strain and secure a deal that works for you. Start early, shop around and don’t hesitate to seek professional advice from a mortgage broker or financial advisor. A proactive approach can make all the difference in navigating this higher rate environment.

Ready to renew your mortgage? Contact an unbiased mortgage advisor such as one of ours at Homewise to explore your options, compare rates, and ensure you’re getting the best possible deal.