If your mortgage is up for renewal in 2025, you might be facing higher payments due to rising interest rates. At Spark Mortgage, we’re here to help you navigate this shift with confidence. Here’s what you need to know and how to prepare for your renewal.
Why Are Mortgage Payments Increasing?
The Bank of Canada has been adjusting interest rates to manage inflation, and while rate hikes have slowed, the impact is still felt. Fixed-rate mortgages renewing in 2025 could see significant payment increases, especially if your original term was locked in at historically low rates (e.g., 1-2% in 2020-2021). Variable-rate mortgage holders may also face higher payments if rates remain elevated or continue to climb.
For example:
- A $500,000 mortgage with a 25-year amortization at 2% has a monthly payment of about $2,112.
- At renewal, if the rate rises to 4.5%, that payment could jump to approximately $2,775—a $663 monthly increase.
Key Factors to Consider
- Market Trends: The Bank of Canada’s overnight rate influences both fixed and variable mortgage rates. As of early 2025, economists predict rates may stabilize but remain higher than pre-2022 levels. Keep an eye on economic indicators like inflation and employment data, as these can signal future rate changes.
- Your Financial Situation: Assess your budget. Can you absorb a higher payment, or do you need to explore options to reduce the impact? Rising living costs, from groceries to utilities, may already be stretching your finances.
- Renewal Timing: Start planning 4-6 months before your renewal date. This gives you time to shop around for the best rates and terms, as lenders compete for your business.
Strategies to Manage Payment Increases
- Extend Your Amortization: If your budget is tight, extending your amortization period can lower monthly payments. For example, stretching a 20-year amortization to 25 years on a $500,000 mortgage at 4.5% could reduce your payment by about $200/month. Keep in mind, this increases total interest paid over time.
- Switch to a Variable Rate: If fixed rates are high at renewal, a variable-rate mortgage might offer lower initial payments. However, be prepared for potential rate fluctuations. Discuss with a Spark Mortgage advisor to weigh the risks and benefits.
- Make Lump-Sum Payments: If you have savings, consider making a lump-sum payment before renewal to reduce your principal. Even $5,000-$10,000 can lower your monthly payments and overall interest costs.
- Shop Around: Don’t automatically renew with your current lender. Spark Mortgage can help you compare offers from multiple lenders to secure the best rate and terms for your needs.
- Consider a Hybrid Mortgage: Some lenders offer hybrid or blended mortgages, combining fixed and variable rates. This can provide stability with some flexibility to benefit from potential rate drops.
Preparing for Your Renewal
- Check Your Mortgage Details: Review your current rate, remaining balance, and renewal date. This helps you estimate potential payment changes.
- Improve Your Credit: A strong credit score can unlock better rates. Pay down debts and avoid new credit applications before renewal.
- Work with a Mortgage Broker: At Spark Mortgage, our brokers can guide you through the renewal process, negotiate with lenders, and tailor solutions to your financial goals.
Final Thoughts
Renewing your mortgage in 2025 may come with challenges, but it’s also an opportunity to reassess your financial strategy. By planning ahead and exploring your options, you can minimize the impact of rising rates and keep your mortgage manageable.
Ready to discuss your renewal? Contact us today for personalized advice and competitive rates. Let’s find the right solution for you!
