Many homeowners counted on renewal to fix debt problems, only to find the door half‑closed
Many Canadian homeowners approach renewal assuming it would be the perfect moment to roll high‑interest balances into their mortgage and reset their finances. Instead, a growing number are discovering that the math no longer works in their favour.
Licensed mortgage broker and LowestRates.ca expert Leah Zlatkin said more clients arrive at renewal expecting to tap home equity, only to find that shifting home values, tighter borrowing limits and higher consumer debt erode their options. That surprise often surface late in the process, when there is little time left to pivot.
“This is something I’m seeing come up more often in conversations with homeowners as they approach renewal,” said Zlatkin. “Many expect to refinance to deal with debt at that point, only to discover that changes in equity, income, or borrowing limits have already narrowed what’s possible.”
Refinancing squeeze at renewal
Equity that once looked ample on paper often shrinks by the time renewal arrives. A softer housing market, combined with loan‑to‑value caps, mean homeowners who diligently made payments still face much smaller refinance room than expected. Credit card balances and other consumer borrowing accumulate after purchase further reduce capacity.
Income shifts are another brake. Life events such as parental leave, a move to self‑employment, reduced hours or semi‑retirement could all weaken a borrower’s ability to qualify to refinance or even switch lenders, leaving some effectively tied to their incumbent.
“Renewal is often treated like a reset button, but for many borrowers it reflects decisions made years earlier,” said Zlatkin.
“If spending and debt growth outpace home equity, refinancing options can shrink quickly. The earlier people understand how debt, equity, and income interact, the more options they will have when renewal arrives.”
Planning earlier, not just hoping for relief
The renewal wave has been building through 2025 and 2026, with a large share of mortgages rolling off ultra‑low pandemic‑era rates and many borrowers facing higher payments at renewal. There's also been rising interest in refinancing for debt consolidation, particularly in high‑priced markets.
For Zlatkin, refinancing to manage debt works best when it was planned years in advance, not treated as a last‑minute fix at renewal. Early conversations about equity, income stability and spending patterns give brokers more room to structure sustainable solutions and reduce the odds that clients would reach renewal only to discover that the safety valve they are counting on has quietly closed.
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