If you bought or refinanced a rental property in Ontario between 2020 and 2022, your mortgage is either coming up for renewal or it already has. The rates you locked in then, some as low as 1.5 to 2.5%, are not the rates you are renewing at today.
This post runs the actual numbers on what renewal means for your monthly payment, your cash flow, and whether your property still makes financial sense at current rates.
How Canadian Mortgage Renewals Work
Unlike the US, where 30-year fixed mortgages are standard, Canadian mortgages have short terms, typically 1, 3, or 5 years. Your amortization period (usually 25 years) stays constant, but your rate resets at the end of each term.
When your term ends, you have three options:
- Renew with your existing lender at their posted rate, sometimes with room to negotiate
- Switch lenders to get a better rate, though this may involve legal and discharge fees
- Blend and extend before your term ends: blending your current rate with the new rate for an extended term, avoiding a penalty
Most investors renew with their existing lender for convenience. That convenience can be expensive if you do not know what rate you should be negotiating for.
The Renewal Math: Three Scenarios
To make this concrete, here is a mortgage that was originally set up in 2021 and is renewing today.
Original mortgage: $480,000 at 2.1%, 25-year amortization, monthly payments
Monthly payment in 2021: approximately $2,071
Remaining balance at renewal (after 5 years): approximately $427,000
Remaining amortization: 20 years
All three scenarios below use the correct Canadian semi-annual compounding formula.
Scenario 1: Renewing at 4.5%
Monthly payment: approximately $2,677
Increase per month: +$606
Annual impact: +$7,272
Total additional cost over 5-year term: +$36,360
Scenario 2: Renewing at 5.0%
Monthly payment: approximately $2,812
Increase per month: +$741
Annual impact: +$8,892
Total additional cost over 5-year term: +$44,460
Scenario 3: Renewing at 5.5%
Monthly payment: approximately $2,951
Increase per month: +$880
Annual impact: +$10,560
Total additional cost over 5-year term: +$52,800
At 5.5%, the investor is paying $880 more per month than they were in 2021. Over a 5-year term, that is $52,800 in additional mortgage costs on the same property.
Use the Mortgage Renewal Impact Calculator to run your own numbers instantly.
What This Does to Cash Flow
Payment shock is one side of the problem. Cash flow impact is the other.
Continuing the example above: assume this is a Toronto semi-detached renting for $3,400/month. Operating expenses (property tax, insurance, maintenance) run $1,100/month.
Cash flow in 2021 at 2.1%:
$3,400 - $1,100 - $2,071 = +$229/month
Cash flow at renewal, 4.5%:
$3,400 - $1,100 - $2,677 = -$377/month
Cash flow at renewal, 5.5%:
$3,400 - $1,100 - $2,951 = -$651/month
A property that was cash flowing positively in 2021 is now cash flow negative at every realistic renewal rate. The investor is subsidizing the property $377 to $651 per month from other income.
This is not unusual. A significant portion of Ontario rental properties purchased or refinanced at pandemic-era rates are now cash flow negative at renewal.
Does Cash Flow Negative Mean Sell?
Not necessarily. Cash flow is one metric. The complete picture includes:
- Principal paydown. Even at higher rates, each mortgage payment builds equity. At 5.0% on a $427,000 balance, roughly $700 to $800 of each monthly payment goes to principal in the early years.
- Appreciation. Ontario real estate has historically appreciated over long holding periods, though past performance does not guarantee future results and markets are cyclical.
- Rent increases. Ontario's rent increase guideline for 2025 is 2.5%. Over a 5-year term, consistent rent increases compound meaningfully against a fixed mortgage payment.
- Tax treatment. Mortgage interest on a rental property is tax-deductible in Canada. At higher rates, more of your payment is interest, which increases your deductible amount. This partially offsets the higher cost. Consult a Canadian accountant for your specific situation.
The decision to hold, refinance, or sell requires modeling all of these factors together, not just cash flow in isolation. The Scenarios tab in Rental Analyst runs all three side by side — see Hold, Sell, or Refinance? Run the Numbers for a full walkthrough.
Three Things to Do Before Your Renewal
1. Know your number 6 months out
Start modeling your renewal 6 months before your term ends. This gives you time to negotiate, shop lenders, or consider a blend-and-extend if rates are moving in your favour. For the complete step-by-step process, see Your Mortgage Renewal Checklist. Most lenders allow early renewal within a 120-day window without penalty.
2. Get competitive quotes
Your existing lender will send you a renewal offer. It is rarely their best rate. Mortgage brokers have access to multiple lenders and can often beat posted rates by 0.25 to 0.5%. On a $400,000+ balance, that difference compounds significantly over a 5-year term.
3. Model the cash flow impact before you sign
Before accepting any renewal rate, run the numbers. What does this payment do to your monthly cash flow? What is your break-even rent at this rate? Does the deal still work?
The Mortgage Renewal Impact Calculator shows you the payment change, annual impact, and 5-year cost at any rate you enter. The Break-Even Rent Calculator shows you the minimum rent you need to cover all costs at the new rate.
Model Your Full Renewal Scenario
The free calculators above handle the individual calculations. Rental Analyst's renewal modeler lets you chain multiple terms together: model what happens at this renewal, then what happens at the next one, and see the full 30-year cash flow trajectory.
If you are within 12 months of renewal, this is the most important financial modeling you can do for your property right now.
This post is for informational purposes only and does not constitute financial, legal, mortgage, or tax advice. All figures are illustrative estimates based on example inputs. Actual results depend on your specific circumstances. Consult a qualified professional before making any investment decision.
Model your renewal before you sign
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