Mortgage Renewals and Home Stats
We just went through our mortgage renewal let's talk about it and take a look at home prices / climate in ontario
Our Renewal
Last year we went through our first renewal and decided to take on our 1 year of pain as we were calling it. AKA shop around a bit for the “best” (in heavy quotation marks) rate we could find and deal with it for 1 year.
Since then rates have come down significantly so it was time to look into the 3,4 or 5 year range.
- Both fortunately and unfortunately we were blessed by the wildly low rates post covid for our first term (<2%). I would be shocked if we get back there anytime soon so we are planning on taking that as a gift and looking forward.
Numbers wise we were able to attain a rate about 50% lower than our current rate.
- Ex/ let’s say our number was 6% then 6/1.5 is 4%
We stuck with the normal BiWeekly payment schedule and our new payments are about 80% of the old ones so that’s great perhaps we will use the difference to contribute as a small lump sum against the principle
I say normal biweekly as there is the accelerated biweekly option which has the same schedule however your payment is higher.
- Your payment is higher because it squeezes 13 months worth of payments into 12 months.
- Let’s look at an example of a 500k mortgage over 25 years @4%
- Biweekly payment: $1,213
- 650 total payments
- Accelerated Biweekly payment: $1,315
- 569 total payments
- Biweekly payment: $1,213
You actually end up saving so much with the accelerated option that your 25 year term mortgage will be paid off in 22ish years. While this sounds amazing you do have to stomach the higher payment and mathematically it may not be the best choice…
As we are very money conscious and still have plenty of room in our tax advantaged accounts its better on paper for us to invest the difference
- this is based on a few assumptions:
- we are perfect robots without emotion (or set it and forget it… ignorance is bliss)
- we can make a higher percentage investing than our interest on our mortgage
- since the average return long term in the stock market is 8-10% a mortgage 6% or less easily qualifies for this over the medium to long term
- 25 years like the typical mortgage is definitely long term
- since the average return long term in the stock market is 8-10% a mortgage 6% or less easily qualifies for this over the medium to long term
Negotiations
We are in the same boat as the vast majority of Canadians where our home is our biggest “investment” and thus we have the most invested in it. Or technically levered into it since we have a large mortgage that we are in the early stages of paying off. So early in fact that we haven’t rounded the corner to the point where we are paying equal amounts principle and interest each year. Over our next term we will pay about 52% interest and 48% principle 😬
With all of that in mind if there is any time to hunt for a good deal, well first off it would be when you are buying your house but assuming you are past that the second best time is during mortgage renewal.
On a $500k mortgage every .1% will save you $500 in interest. (technically a bit lower as you pay the principle down a bit with each payment)
Looking at a more detailed example after a 5 year period of a $500k mortgage you would have:
BiWeekly
| Rate | Interest $ | Principle $ | Total $ | Principle Left |
|---|---|---|---|---|
| 4% | $93k | $65k | $158k | $435k |
| 4.1% | $95k | $64k | $159k | $436k |
Accelerated BiWeekly
| Rate | Interest $ | Principle $ | Total $ | Principle Left |
|---|---|---|---|---|
| 4% | $92k | $79k | $171k | $421k |
| 4.1% | $94k | $79k | $173k | $421k |
Now that we have illustrated the importance of even .1% less in your rate, how do you go about getting that?
For us we went to one of the big 6 banks for our firs term and had a family friend get the lowest for us that we could. It was comfortable for us to do this for our first term but perhaps not the best choice mathematically.
We have now renewed twice and the strategy we took was to check online and see what the bank was offering us to renew online. It was about .15% less than we received in the renewal notice. I then reached out to a specialist at the bank and asked what the best was that they could get for us. That number was another .15% less than in the online portal.
Good news is that we were moving in the right direction and that made me confident that we could get lower still.
At this point most people would tell you to go with a mortgage broker who has access to many lenders but is not tied to any specific one. I think that is likely the best choice but it is not exactly what we did. Instead we leveraged other family friends to ask what the lowest was that they had seen over the last little while.
After that I went on the hunt to find screenshots of the lowest rates I could from competitors. Now this isn’t always easy as typically lenders will post decent but not their best rates. You could technically take it a step further and get some quotes but if you are going to go that route is likely easier to go with a broker.
Equipped with all of this information I went ahead and asked for the specialist to put in an exception request and waited.
A mere 24 hours later they came back with a rate another 0.2% lower which we accepted.
Adding all of those together we ended up getting a rate 0.5% lower than originally offered. Let’s add that back to our $500k mortgage example
| Rate | Interest $ | Principle $ | Total $ | Principle Left |
|---|---|---|---|---|
| 4% | $93k | $65k | $158k | $435k |
| 4.1% | $95k | $64k | $159k | $436k |
| 4.5% | $105k | $61k | $166k | $439k |
Absolutely wild over the 5 year period 0.5% is:
- $12k more in interest
- $4k less in principle paid
Stats
Before we wrap up let’s take a look over the Canadian home stats. The average selling price of a:
- home in Canada decreased by 2.1% year-over-year to $712,200 in March 2025.
- single-family home in Canada decreased by 1.8% year-over-year to $787,600 in March 2025.
- townhouse/multiplex in Canada decreased by 2.6% year-over-year to $653,200 in March 2025.
- condo in Canada decreased by 3.4% year-over-year to $512,300 in March 2025.
The average rent in Canada decreased by 1.9% year-over-year to $2,101 for March 2025.
Looking at rates over the past year we have
| Month | BoC Target (%) | 5 Year Mortgage Rate as per CMHC (%) |
|---|---|---|
| April 2025 | 2.75 | 5.15 |
| March 2025 | 2.75 | 5.22 |
| February 2025 | 3.00 | 5.29 |
| January 2025 | 3.00 | 5.31 |
| December 2024 | 3.25 | 5.35 |
| November 2024 | 3.75 | 5.38 |
| October 2024 | 3.75 | 5.44 |
| September 2024 | 4.25 | 5.55 |
| August 2024 | 4.50 | 5.73 |
| July 2024 | 4.50 | 5.91 |
| June 2024 | 4.75 | 5.98 |
| May 2024 | 5.00 | 6.05 |
| April 2024 | 5.00 | 6.08 |
Unfortunately even though the Bank of Canada has come down a lot since last April mortgage rates have not kept up
Wrap Up
I hope this whirlwind tour of our mortgage renewal gives you some insight and better yet the tools to help you save as much as possible on your next mortgage or mortgage renewal. Best of luck!
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Cheers ☕