3 important tips to manage higher mortgage payments

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Q: My partner and I have been talking to various mortgage brokers because our mortgage is up for renewal in October. We’re really worried about our payments increasing because our budget is already so tight. However, if we want to stay in our home, it looks like we’ll have to pay about $465 extra each month compared to what we’re paying now. This is stressing us out. We have no idea how we’ll be able to manage. What can you suggest? ~Kelson

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A: Ever since Canada was gripped with high inflation and the ensuing measures to bring it back down, homeowners with existing mortgages have been bracing for higher payments at mortgage renewal time. In fact, according to the Canada Mortgage and Housing Corporation (CMHC), in 2024 and 2025, 2.2 million mortgages will come up for renewal. This represents 45 per cent of Canada’s outstanding mortgages.

Knowing that you’re not alone is little comfort when grappling with how to balance your budget to manage higher payments. However, when a significant percentage of the population faces a similar challenge, ideas around how to manage are prolific. With that in mind, here are tips to help you manage higher mortgage payments.

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Review mortgage payment options with lenders

When it comes to mortgage renewals, lenders are keenly aware of the payment shock homeowners are currently experiencing. However, it’s still worth asking what they can do to lower your payments. After negotiating the best rate possible, locking it in provides stability and predictability and allows you to plan your finances more effectively. Having a firm renewal rate also makes it easier to shop around and compare. While changing lenders means re-qualifying for the mortgage, it can be worth it if the rate is lower than your current quoted renewal rate. In addition, high-ratio insured borrowers who don’t increase the size of their mortgage or extend their amortization may be exempt from having to re-qualify by way of the stress test, even if they renew their mortgage with a different lender.

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What Happens If Your Mortgage is Higher Than Your Property Value

Despite this, another option to consider for lower mortgage payments is extending your amortization. Your lender can provide you with various scenarios based on what you qualify for. Additionally, if other debt payments are challenging for your budget, consolidating that debt into your mortgage could be an option. Just be cautious; refinancing, especially with an extended amortization, can be more expensive in the long run.

How Much Debt is Too Much

When considering mortgage refinancing, it’s crucial to maintain a realistic budget that allows you to live comfortably without incurring more debt. You don’t want to find yourself back in debt after paying off existing obligations. Then, as soon as you’re financially able, focus on making larger mortgage payments directly toward the principal. This strategy helps chip away at the consolidation portion of your refinanced mortgage. Additionally, review options with your lender to understand the prepayment privileges associated with the specific type of mortgage you select so that you can be prepared for your next renewal date.

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Two ways to find money around your home

Several hundred dollars isn’t typically the amount of money you’d find tucked away in your couch cushions. However, it could be hidden in your home. Go on a room-to-room search, checking every closet, cabinet, and drawer for items to sell. If an item isn’t of sentimental value, isn’t seasonal, and hasn’t been used in over six months, chances are you wouldn’t notice if it were gone. Consider organizing a yard sale or selling items via social media platforms like Facebook Marketplace or even directly to friends. Set the money aside in a separate savings account to make it easy to track your progress.

Where to Find Money to Save Each Month

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Next, reconcile your bills and bank accounts. Analyze each bill for potential opportunities to reduce costs and fees. Mark payment due dates on your calendar to avoid late fees or extra interest charges that increase your bills unnecessarily. Work to promptly pay off small bills and devise a payment strategy for larger ones if you didn’t refinance your mortgage to consolidate debt. The interest on high-interest credit cards and lines of credit could amount to a few hundred dollars each month. Eliminating those bills will free up funds that can be allocated toward increased mortgage payments.

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Practical ways to generate additional funds

Balancing your budget by generating income without the counterbalance of reducing expenses can be challenging. If you already have a full-time job, generating additional income can’t come at the expense of that primary job. Ensure that you’ve reviewed all of your expenses and discretionary spending before determining how much additional income you need. Then, consider options to earn a few hundred dollars more each month. Here are some ideas to get you started:

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Volunteer for overtime

Even if your workplace doesn’t have an overtime policy, mention to your manager that you’re available to work additional hours. They could be willing to take you up on your offer, especially if it’s more cost effective to pay you overtime versus hiring and training a new employee.

Look for referral bonuses

Businesses often reward clients for bringing in new customers with a cash bonus, or free or discounted service. Take advantage of those bonuses when you’re happy with a product or service.

Hire yourself out for jobs that others don’t like to do

Every home and workplace have tasks that no one likes to do. Consider if you have skills that could turn into niche contract work. For example, if you’re an Excel whiz, offer a service to reformat spreadsheets. If you have a passion for clean lunchrooms, target buildings with several offices in each and provide a specific cleaning service. If organization is your thing, market your services to homeowners who need help sorting and organizing their garage.

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Coaching or consulting

Do you have years of experience in a specific industry, sport, or hobby? When someone is learning a new skill, a mentor can make all the difference. Offer your wisdom for a fee and help someone master PowerPoint, tennis, hiking, or furniture restoration.

Offer companion services

If you have a passion for mature folks, countless older adults would welcome someone to shop with whom to go for lunch, tend their garden, or play cards, and many are willing to pay for a companion.

Tutor online

If you have knowledge in a subject that can be taught online, such as math, music, or a second language, consider offering hourly tutoring from the comfort of your dining room or home office. Consider leveraging time differences to reach additional potential students.

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Become a virtual assistant

Freelance work can take many forms and there are individuals who would benefit from a part-time assistant. If you have computer proficiency, strong written and verbal communication abilities, excellent skills in scheduling and organization, and a keen eye for detail, your services could be a valuable addition to a busy family, manager, or office team.

Supplement your commute

If you commute a long distance to work, consider paid carpooling by becoming a ride-hailing driver for just that route. If you drive at a time and through an area where deliveries could be made along the way, you might want to offer a niche delivery service. Or consider offering to have your car wrapped and become a driving billboard.

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The bottom line on managing higher mortgage payments

There are countless blogs and websites dedicated to freelancing, the gig economy, and ways to increase your income. Depending on what you choose to do, ensure that you have the correct insurance and licensing in place to protect yourself and your clients. There is no one-size-fits-all answer to finding extra income to put toward expenses, so don’t overlook the more typically touted options of taking in a border or renting out your garage. Sharing your home even temporarily, can help you find your footing with a sustainable approach for balancing your budget to ensure financial stability for your family.

Related reading:

What to Do When the Cost of Living is Stressing You Out

How to Deal With Higher HELOC Payments

Get Debt Relief from Your Mortgage

Peta Wales is President and CEO of the Credit Counselling Society, a non-profit organization. For more information about managing your money or debt, contact Peta by email, check nomoredebts.org or call 1-888-527-8999.

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