Mortgage Renewal Shock in Ontario: What to Do If You Can’t Refinance  

Across Ontario, many homeowners are reaching their mortgage renewal date and facing higher interest rates after several years of much lower rates. For a large number of households, the new mortgage payment can be meaningfully higher than what they were paying before. The Bank of Canada has estimated that about 60% of mortgage holders renewing in 2025 and 2026 are expected to see a mortgage payment increase.  

For some people, the plan is to refinance their mortgage at renewal and roll their unsecured debt into their mortgage, extend amortization, or borrow to “reset” the monthly budget. But that plan may not work as expected if: 

• A spouse or co-owner won’t consent to refinance 

• Income no longer meets the lender’s affordability requirements 

• The mortgage stress test blocks the amount needed 

• The home’s value has dropped (or equity is lower than expected) 

Even homeowners who are not refinancing and simply renewing their mortgage may still feel squeezed if the higher mortgage payment leaves less room in their budget to pay living expenses and service credit cards, lines of credit, CRA balances, or other unsecured debts. 

What can you do when renewal arrives and the numbers don’t work? 

Below are practical, Ontario-focused options to discuss with your lender and trusted advisors, and (where appropriate) debt-relief options that are administered only by a Licensed Insolvency Trustee (LIT) under Canada’s Bankruptcy and Insolvency Act. 

Why refinancing may fall apart at renewal 

1) The mortgage stress test and qualifying rules 

For many federally regulated lenders, the borrower must show they can afford mortgage payments based on the greater of: 

• The contract rate plus 2%, or 

• 5.25% (the minimum qualifying rate)  

This qualification hurdle can reduce how much a household can borrow especially when: 

• Income is lower due to job change, reduced hours, parental leave, illness, etc. 

• Other debts have increased 

• Household expenses went up such as food, childcare, utilities, etc. 

Important nuance: if you are simply renewing your existing mortgage with the same lender, you typically do not need to re-qualify under the stress test. But refinancing (increasing the mortgage or changing key terms) usually triggers the qualification process again. 

2) Switching lenders may be easier than it used to be (in “straight switch” cases) 

In late 2024, changes were introduced so that some borrowers switching lenders at renewal without increasing the mortgage amount or amortization may not be subject to a new stress test for that switch. 
 
This matters if you’re trying to shop for a better rate to reduce the payment pressure. 

3) A spouse or co-owner says no 

If a spouse has cosigned the mortgage, or if a spouse is on title to the property or required for lender approval for other reasons, then refinancing will likely require spousal consent and signing. Sometimes the issue is: 

• Relationship breakdown or separation 

• Disagreement about taking equity out to pay unsecured debt 

• Fear of “risking the house” or extending the mortgage longer 

In many cases, this becomes less about math and more about finding a workable household plan before making major borrowing decisions. 

4) Home value is down, equity is thinner, and loan-to-value limits bite 

If the home’s value is lower (or hasn’t risen as expected), the refinance you planned may not be available because the lender won’t advance funds beyond certain loan-to-value thresholds. Lower equity also affects whether mortgage insurance or lender pricing is available and how expensive borrowing becomes. 

Here is a practical plan if your renewal payment jumps: 

Step 1: Ask your lender or advisor about renewal options that reduce immediate payment pressure 

Depending on your lender and your mortgage type, options may include: 

• Extending the amortization period to reduce the monthly payment (this can increase total interest over time)  

• Adjusting payment frequency (e.g., monthly vs. accelerated) to better match cash flow 

• Choosing a shorter fixed term vs. variable (or vice versa) based on risk tolerance 

• Negotiating the best renewal pricing and seeing what “switch” offers exist (especially if you qualify for a straight switch)  

The FCAC (Federal Consumer Agency of Canada) specifically cautions borrowers to think carefully before extending amortization periods just to lower their mortgage payments, because it can substantially increase the total interest paid on the mortgage (i.e. cost of borrowing).  

Key point: the goal here is not “perfect optimization.” It’s preventing your mortgage from destabilizing the rest of your finances. 

What else can you do when refinancing to consolidate debts isn’t possible?  

Option A: Restructure your unsecured debts (without touching the mortgage) 

If the mortgage must be “left alone,” the next lever is usually the unsecured side of the budget. 

Depending on your situation, you may be able to: 

• Negotiate lower interest or a hardship plan on existing credit cards or LOCs, as the banks sometimes have temporary relief programs. 

• Consolidate debt with a lower-interest rate installment loan (if credit and income allow) 

• Consolidate debt with a second mortgage or HELOC (but be wary of the higher cost of borrowing and aggressive default terms often associated with private mortgage lenders)  

• Stop using revolving credit and switch to a strict cash-flow plan while you stabilize 

This can work when unsecured debt is relatively modest and income is steady. 

Option B: If the math simply doesn’t work, a consumer proposal may reduce unsecured debt payments 

A consumer proposal is a legal debt-relief process under the Bankruptcy and Insolvency Act that can: 

• Reduce the amount you repay on unsecured debts (based on what you can afford and what creditors would reasonably accept) 

• Stop collection actions (including wage garnishments related to unsecured debts, once in effect) 

• Allow you to keep your assets, including your home, as long as you maintain the secured payments and the proposal terms (every case is different) 

A consumer proposal is administered only by a Licensed Insolvency Trustee. It is not a loan, and it does not require you to qualify under a mortgage stress test because it is not mortgage refinancing. 

This option can be particularly relevant when: 

• The mortgage renewal payment rises and you can no longer keep up with credit cards/LOCs/CRA unsecured balances 

• Refinancing is blocked (stress test, spouse refusal, lower home value) 

• You need a predictable monthly payment you can actually sustain 

Personal bankruptcy is also administered only by a Licensed Insolvency Trustee under the Bankruptcy and Insolvency Act. It may be considered when: 

• Income and cash flow cannot support a proposal payment 

• The unsecured debt load is overwhelming 

• There is little ability to recover financially in a reasonable way without formal relief 

Bankruptcy has important consequences and requirements, and you should get individualized guidance from an LIT before making any decisions. 

What if the spouse refuses to refinance, how do you move forward? 

If the refinance plan depended on both spouses agreeing, and that agreement isn’t there, practical alternatives may include: 

• Renew only (no refinance) and deal with unsecured debt separately (budgeting, proposal, etc.) 

• Seek independent legal advice if separation, title, or support obligations are involved 

• Build a household plan that protects essentials first: mortgage, utilities, food, child costs then address unsecured debt realistically 

Where there is conflict, I often encourage people to shift the conversation from “Should we refinance?” to: 
“What payment plan keeps the household stable and avoids compounding costs?” 

Sometimes the answer is a mortgage-only renewal plus a formal unsecured-debt solution. 

Watch-outs: solutions that can create bigger problems later 

These are not automatic “don’ts,” but they deserve caution: 

• Extending amortization indefinitely to chase a lower payment can increase total interest significantly over time.  

• High-cost consolidation loans or private mortgages can add fees and risk with aggressive default terms, especially if used as a temporary patch 

• Using secured borrowing to repay unsecured debt can shift risk onto your home; if income later drops, the consequences may be more serious 

When should you speak with a Licensed Insolvency Trustee? 

It may be time to speak with a Licensed Insolvency Trustee (LIT) if  your budget no longer works even if you’re still making the mortgage payment. Common warning signs include: 

• You can handle the new mortgage payment, but can’t keep up with minimum unsecured debt payments 

• You’re using credit to cover essentials (groceries, utilities, childcare) month after month 

• You’re falling behind on taxes, utilities, or other priority bills 

• You’re facing collection pressure, legal action, or wage garnishment related to unsecured debts 

• You’re considering high-cost borrowing (e.g., payday loans) to “bridge the gap” 

A Licensed Insolvency Trustee can review your specific circumstances and review the pros & cons of all your options, including how options like a consumer proposal or bankruptcy may help, what the processes involves, and what a realistic monthly payment might look like. This is not legal advice, and the right option (if any) depends on your income, assets, household obligations, and secured payments like your mortgage. 

If you’re in Ontario and want to review your situation with a trustee, David Sklar & Associates (Licensed Insolvency Trustees) can provide an assessment of your debt-relief options under the Bankruptcy and Insolvency Act, including whether a consumer proposal may help relieve pressure from unsecured debts while you focus on maintaining your mortgage payments. 

Quick answers about mortgage renewal and debt in Ontario