{"id":287944,"date":"2023-06-29T16:50:46","date_gmt":"2023-06-29T16:50:46","guid":{"rendered":"https:\/\/wahi.com\/ca\/en\/?p=287944"},"modified":"2026-02-24T10:32:33","modified_gmt":"2026-02-24T15:32:33","slug":"how-to-prepare-for-higher-mortgage-payments","status":"publish","type":"post","link":"https:\/\/wahi.com\/ca\/en\/learning-centre\/real-estate-101\/buy\/prepare-for-higher-mortgage-rates\/","title":{"rendered":"How to Prepare for Higher Mortgage Payments"},"content":{"rendered":"

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Wahi speaks to financial experts to see what homeowners can do to get ready for larger monthly mortgage repayments when renewing their loans.<\/span><\/p>\n

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By Josh Sherman<\/a>\u00a0<\/span>| 4 minute read<\/p>\n

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Interest rates have been steadily rising over the past year, so homeowners with fixed-rate mortgages in Canada might want to begin planning for higher monthly repayments upon renewal.<\/span><\/p>\n

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Rising interest rates have already been causing headaches for some mortgage borrowers<\/a>, but many have been sheltered from higher monthly payments \u2014 for now.<\/span><\/p>\n

 <\/p>\n

Of the 35% of households<\/a> in Canada with mortgages, more than two thirds have locked in a fixed-rate, meaning fluctuations in the Bank of Canada\u2019s overnight rate don\u2019t have an immediate effect on their repayments.<\/p>\n

 <\/p>\n

However, even these fixed-rate borrowers aren\u2019t spared come renewal time. As the most common term for these loans is five years, the clock is ticking. More and more Canadians holding fixed-rate mortgages are facing the prospect of much higher monthly housing costs. \u201cOver the next few years, we will experience the greatest quantity of mortgage renewals in Canadian history so it\u2019s natural for people to be thinking about what their budgets will look like once their payments reset,\u201d Bekim Merdita, executive vice president of Rocket Mortgage Canada<\/a>, tells Wahi.<\/span><\/p>\n

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“Canadians should be looking at their available cash flow and expenses today to ensure they\u2019ve prepared their budgets for the increased payment.”<\/strong><\/span><\/h2>\n

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“Homeownership is a long-term investment. Rate cycles will always be a reality of the homeownership journey and do affect people in the short term,” Merdita adds. <\/span>To help homeowners prepare for higher rates, Wahi turned to financial experts, who provided five tips:\u00a0<\/span><\/p>\n

 <\/p>\n

1. Run the numbers\u00a0<\/b><\/h2>\n

 <\/p>\n

\u201cThe best place to start preparing is first understanding what that increase could be,\u201d says Merdita. \u201cFor example, on a $300,000 mortgage balance the payment is approximately $400 higher per month at a 5% rate than at 2.5% rate,\u201d he says by way of example.<\/span><\/p>\n

 <\/p>\n

Explore a range of scenarios, not just the one you\u2019d be confronted with if your renewal date were next month, suggests Anita Bruinsma, founder of Clarity Personal Finance<\/a>. \u201cThen you have at least a sense of how much higher your payment is going to be \u2014 so that is step one,\u201d says the self-described \u201cfinancial coach\u201d who has a chartered financial analyst (CFA) designation.\u00a0<\/span><\/p>\n

 <\/p>\n

2. Track your spending\u00a0<\/b><\/h2>\n

 <\/p>\n

\u201cCanadians should be looking at their available cash flow and expenses today to ensure they\u2019ve prepared their budgets for the increased payment,\u201d Merdita recommends.<\/span><\/p>\n

 <\/p>\n

In Bruinsma\u2019s experience, lots of homeowners are unaware of exactly how much money they\u2019re spending. \u201cGenerally people underestimate how much their life costs on a year-to-year basis, and they can be really shocked when they see the real number,\u201d she tells Wahi. \u201cI encourage my clients to go back six to 12 months \u2014 12 months is best \u2014 and look at all of their spending and categorize it so that they know exactly how much their life is costing,\u201d she adds.<\/p>\n

 <\/p>\n

Also consider how future plans might impact your finances and ability to absorb higher interest rates. Perhaps you\u2019ll need to pay for childcare next year, for example. \u201cIt\u2019s a lot of forward-looking planning as well as looking back at what you\u2019ve been spending,\u201d Bruinsma says. From there, mortgage borrowers should prepare an annual cash-flow statement, which includes all your income minus taxes and other expenses, to see where their household stands.<\/p>\n

 <\/p>\n

3. Reduce expenses\u00a0\u00a0<\/b><\/h2>\n

 <\/p>\n

If it looks like you won\u2019t be able to shoulder a rate increase under current circumstances, it\u2019s obviously time to mull cutting back on certain expenses. When doing so, think big. \u201cThere could be the small expenses, but it\u2019s kind of better to look at the big ones,\u201d Bruinsma explains. In the past, some of her clients have decided to get rid of one of two cars. \u201cOf course, vacations would be another big one,\u201d she offers.<\/span><\/span><\/p>\n

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