How to Reduce Your Mortgage Payment

You may be able to reduce your mortgage payment by renewing at a lower interest rate, extending your amortization period, refinancing or lowering your outstanding mortgage balance.

The right option depends on your mortgage contract and financial situation. Keep in mind that lowering your monthly payment can sometimes increase the total interest you pay over time.

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1. Get a Lower Mortgage Rate

A lower interest rate can reduce the amount of your payment going toward interest.

Your mortgage renewal is a good time to:

• Compare rates from different lenders
• Negotiate with your existing lender
• Consider a mortgage broker
• Compare fixed and variable rates

The Financial Consumer Agency of Canada recommends shopping around when your mortgage comes up for renewal rather than automatically accepting your lender's first offer.

If you want to switch or refinance before your term ends, check whether breaking your existing mortgage would trigger a prepayment penalty.

2. Extend Your Amortization Period

Your amortization is the total amount of time you expect to take to repay your mortgage.

Extending it can lower your regular payment because you spread the remaining balance over more years.

For example, the Government of Canada illustrates that a $300,000 mortgage at 4% would have an estimated monthly payment of $1,813 over 20 years compared with $1,578 over 25 years.

The trade-off is that you pay interest for longer.

A longer amortization can add thousands or even tens of thousands of dollars to your total borrowing cost.

3. Refinance Your Mortgage

Refinancing means replacing or renegotiating your existing mortgage.

You might refinance to:

• Get a lower rate
• Change your amortization
• Consolidate higher-interest debt
• Change your mortgage structure

However, refinancing before your mortgage term ends can result in significant penalties and other costs.

These may include:

• Prepayment penalties
• Appraisal fees
• Administration fees
• Mortgage discharge fees

Compare the savings from the new mortgage with the cost of breaking the old one before refinancing.

4. Make a Lump-Sum Payment

Paying down part of your mortgage reduces the balance on which interest is calculated.

Depending on how your mortgage is structured, this can help lower future payments when your mortgage is renewed or re-amortized.

Many mortgages include prepayment privileges that allow you to make additional payments without a penalty.

The amount you can pay varies by lender and mortgage contract.

Check your agreement before making a large payment.

5. Use Your Mortgage Renewal to Restructure Payments

At renewal, you have more flexibility to change your mortgage without breaking the existing term.

You may be able to:

• Negotiate a lower rate
• Switch lenders
• Change your payment frequency
• Adjust your amortization
• Make a lump-sum payment before renewing

If rates have fallen since you originally took out your mortgage, a lower renewal rate may allow you to reduce your payment.

6. Ask Your Lender About Mortgage Relief

If you are struggling to make payments, contact your lender before missing one.

Depending on your circumstances, your lender may offer temporary relief such as:

• Extended amortization
• Temporary payment deferral
• Payment adjustments
• Other mortgage relief measures

A payment deferral does not erase what you owe. Deferred amounts still have to be repaid and can increase your total interest costs.

Will Switching to Biweekly Payments Lower Your Payment?

Changing payment frequency does not necessarily reduce how much you pay overall.

Standard biweekly payments simply divide your annual mortgage payments into smaller, more frequent amounts.

Accelerated biweekly payments actually increase how much you repay each year. This can reduce interest and help you pay off the mortgage faster, but it is not designed to lower your overall payment burden.

Can You Lower Your Mortgage Payment Without Refinancing?

Possibly.

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

• Negotiating a lower rate at renewal
• Extending your amortization at renewal
• Making a lump-sum payment
• Using a blend-and-extend option
• Asking your lender about temporary relief

Is Lowering Your Mortgage Payment Always a Good Idea?

Not necessarily.

A lower payment can improve your monthly cash flow, but it may come at a cost.

Extending your amortization, for example, lowers your payment but increases the amount of interest you pay over the life of the mortgage.

Before making a change, compare:

• Your new monthly payment
• Your new interest rate
• Remaining amortization
• Refinancing or penalty costs
• Total interest paid

The goal should be to make your mortgage affordable without unnecessarily increasing its long-term cost.