As mortgage payments go up, should you renew or refinance your home loan?

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interest rate – and as Zlatkin says, most mortgage-holders will see higher monthly payments after a swiftstring of increases to the Bank of Canada’s key rate.Refinancing involves breaking the current contract entirely and signing a fresh one. It’s a useful option for those looking to access home equity, consolidate debt or switch lenders for a better rate.

It also allows the borrower to extend their amortization period, or the length of time to fully pay off the mortgage.For those with thinner wallets, “you’re refinancing in order to re-amortize to a longer period of time to ease those payments,” Zlatkin said.The result may be more total interest paid in the long term, but the monthly costs are lower, since the payments are stretched over several more years.Research from the Bank of Canada shows nearly half of Canadian mortgages had amortizations longer than 25 years as of June 30. The proportion has been climbing steadily from 32 per cent in the summer of 2020.Borrowers whose mortgage rates have soared to the point that their monthly payments barely cover the interest portion – or fail to do even that – might consider a lump-sum payment if they’re fortunate enough to have some spare cash on hand.“There’s been a high number of customers liquidating some of those savings that they have and putting it toward their mortgage,” said Nick Palucci, senior director of client strategy at the Royal Bank of Canada.Those on the hunt for a better rate than the one offered by their lender can seek the help of a mortgage broker.Renewal is the more typical route, and makes sense “as long as you’re offered a favourable rate,” according to Zlatkin.“Your bank is going to give you their best rate.