How to Lower Your Mortgage Payment at Renewal

UPDATED November 3rd, 2025

The hard truth is that anyone renewing their 5 year old mortgage right now is getting a higher interest rate, meaning their mortgage payment is going to go up.

If you’re in that situation, it can be a painful truth to face. Thankfully, rates have come down from the highs of 2022 and 2023. But you’re still going to face a higher mortgage payment than you’ve been used to for the last 5 years.

So what are your options?

It will be hard to keep your budget intact with that higher payment, especially given current inflation levels. There are, however, a few ways to lower your mortgage payment and give your budget some room to breathe.

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Lower your new mortgage payment by extending amortization

When you bought your home, you signed up for a 25 or 30 year amortization. That means interest for the loan on your house was calculated with the assumption that you would pay it off in 25 or 30 years.

To keep things simple, let’s say your original amortization was 25 years.

Let’s also assume your mortgage term (which is different from amortization) is 5 years. That means that, after 5 years, you’re allowed to renegotiate your mortgage contract (although certain restrictions apply). 

So your mortgage is nearing the end of its term, that 5 year period. You’re due to renew your mortgage for another 5 years with your current lender, or  switch to a new lender (maybe they have better rates and prepayment options).

At renewal, you have 20 years left in the life of your mortgage.

The most effective way to lower a mortgage payment is to extend that amortization back out to 25 years.

How to re-amortize and get a lower mortgage payment?

Over the last 5 years, you’ve paid off a significant chunk of your original mortgage loan. The balance remaining is lower. Stretch that remaining balance out another 5 years and your monthly payment will drop.

Hard to visualize? Hopefully this graphic helps:

Let’s do some math.

You bought your home for $500,000. You put down 5% ($25,000). With the mortgage default insurance added into your mortgage, your the total loan was $494,000.

Let’s say your interest rate was 2.5%. With a 25 year amortization, your mortgage payment was $2,213 monthly.

In the last 5 years, you paid $75,888.61 off of your original mortgage loan. Your remaining mortgage balance is $418,111.39.

Now you’re coming up for renewal and the new rate the bank offered you is 3.9%. Your new monthly mortgage payment will be $2,505.

Can you afford to pay $300 more each month on your mortgage?

What happens if you extend your amortization from 20 years to 25 years? 

Your monthly payment on a mortgage balance of $418,111.39 at 3.9% interest over 25 years would be $2,177.

That’s actually $36 less than your original mortgage payment!

Now, if only everything were that simple…

When you switch mortgage lenders, it’s usually a simple process with no fees.

However, if you’re also hoping to re-amortize, there may be transfer fees or higher interest rates. It depends on the lender you’re with, the lender you’re transferring to, and your financial situation when you transfer.

In that case, it’s best to talk to a local mortgage agent.

Let’s go through a few mortgage transfer options, starting with the cheapest way to switch and maybe lower your payment…

How prepayments affect your mortgage renewal

Most mortgages give you the option to pay down your mortgage principal directly. Usually you’re allowed to prepay 15% or 20% of your original loan amount each year.

You may also have the option to double up on your mortgage payments whenever you want.

We’ll dive deeper into the power of prepayment in a later post, but here’s a small example of what prepayment can mean for you at renewal.

Let’s go back to our example above. A $494,000 mortgage at 2.5% for 25 years is a $2,213 monthly payment. After 5 years you owe $418,111.39.

At renewal, your interest rate goes up to 3.9% and your mortgage payment will be $2,505.

Let’s say you made lump sum prepayments of $2000 each year for the last 5 years. That drops your balance owing to $407,375.46. 

Usually, your amortization at renewal would have been 20 years, but because you paid $10,000 directly off your mortgage principal ($2,000 for 5 years), your remaining amortization will be less than 20 years on renewal.

But if you wanted to reduce your new mortgage payment a bit, most lenders will let you extend your amortization back up to 20 years (what it would have been at renewal without prepayments).

That new balance, $407,375.46 amortized over 20 years at 3.9% is $2,441 monthly. That’s $64 less a month than if you hadn’t made any prepayments.

Does that feel a little better?

More prepayment now means more potential to reduce your monthly payment later.

You may still have time to prepay your mortgage and create some breathing room at renewal…

Do you have savings or investments you can access before your mortgage renews?

This may be tough to hear, but what about your boats, ATVs, Ski-Doo’s and so on? Can you sell one to fund a mortgage prepayment?

How much of a bonus are you getting this year? How much was your tax return? Are you able to work overtime?

Depending on how much time you have left until renewal, there could be many options to help you create space in your mortgage without drastically altering your lifestyle.

Find out how much you’re allowed to prepay each year (usually between 15% and 20% of your original loan amount). Once you have the cash ready, make the additional payment.

If you want to calculate how much room that prepayment is going to create, you can use this free mortgage calculator.

You can also book a call with a dedicated mortgage agent (a.k.a ME!) and work with them to find out exactly how much your prepayment will save you at renewal.

I can’t prepay and I can’t re-amortize… what can I do?

All is not lost. You’re just playing the long game.

Most banks and lenders will work hard to keep their current clients. But not right away.

They may offer you a mediocre rate and terms as you approach renewal. But they can do better. Sometimes they can do much better. You just have to apply the right pressure. Here’s how…

Get a commitment letter from another lender with better rates and terms. Take that letter to your lender and ask them to match or beat your new offer. If they don’t, switch your mortgage. Either way, you win.

How do you get a commitment letter from another lender?

Give us call and let us know your situation. 

Tell them us you can’t make a prepayment and you can’t re-amortize your mortgage at renewal, but you’d like to see if you qualify for better rates with other lenders.

Be upfront about your intentions, though. Let us know that once you get a commitment letter from a lender, you’re going to take that letter back to the bank and see if they’ll match or beat it.

Some mortgage brokers won’t do this. And that’s fine. They have to prioritize their time how they see fit.

I’m more than willing to help you get a better deal, even if it’s from your bank.

It all starts by book a call. Thankfully, you can pick the date and time that work best for you below.