Renting out a suite can help you afford your mortgage renewal, but it is not the only way to survive the upcoming payment shock. Before you invite a stranger into your basement, you should explore how a simple lender switch could save you hundreds of dollars a month without the headaches of becoming a landlord.
Picture a typical homeowner in London, Ontario, who bought their property five years ago with a $450,000 mortgage. Back then, they locked in a comfortable 2.5% fixed rate, keeping their monthly payment at a manageable $2,015. Fast forward to today, and their remaining balance is sitting around $380,000. With current five-year fixed rates hovering in the 4.5% range, their new monthly payment is set to jump to roughly $2,400. That is an extra $385 disappearing from their bank account every single month, a textbook example of the payment shock hitting families across the province.
If you are worried about your mortgage renewal, you are definitely not alone in this boat. An estimated 1.15 million Canadian households face renewals in 2026, with many five-year fixed borrowers staring down average payment hikes of 15% to 20% according to CMHC data. A recent Mortgage Professionals Canada survey from June 24, 2026, revealed that a full third of Canadian mortgage holders expect to renew within the next 12 months, and a staggering 67% of those approaching renewal feel highly anxious about these higher rates. This anxiety is driving people to look for creative, sometimes drastic, ways to keep their homes.
Is Renting Out Part of Your Home the Answer?
Desperate times lead to creative housing solutions, which is why ‘house hacking’ has exploded in popularity. The June 2026 MPC report highlighted that 36% of Canadians say they need to rent out part of their home to afford homeownership, a number that spikes to 53% when looking specifically at newcomers. It is a logical plan on paper: lease out your basement or spare bedroom, collect a thousand dollars a month, and use that cash to cover the renewal gap.
But being a landlord in Ontario is far from a walk in the park. The province has strict tenant protection laws, meaning a bad tenant can turn your sanctuary into a financial nightmare. If you do decide to go this route, federal rules updated in January 2025 allow you to refinance an insured mortgage up to a $2,000,000 home price limit specifically to build a secondary suite, as long as you do not use it for short-term rentals. Just keep in mind that lender adoption of this refinancing product is still quite limited, and you will need to weigh the upfront construction costs against the actual rental income you will bring in.
The Easier Route: Switching Lenders Stress-Test Free
Many homeowners do not realize they have a much simpler option than construction or roommates. If you are struggling to afford your mortgage payments, you can shop your mortgage to other lenders to find a lower rate. Thanks to OSFI rules, uninsured borrowers who execute a straight, stand-alone switch to another federally regulated lender at renewal are completely exempt from the mortgage stress test. This means you do not have to prove you can qualify at your contract rate plus 2.0% (or the 5.25% floor) just to get a better deal elsewhere.
This exemption is a massive win for your household budget. It allows our mortgage broker in London team to shop your mortgage across our network of over 40 lenders. Instead of quietly accepting the high renewal rate your current bank offers because you are scared you won’t qualify elsewhere, you can walk away to a lender offering a better rate, hassle-free.
Our Take: Shop the Rate Before You Rent the Room
Here is what we actually tell clients who walk into our office: do not sign up to be a landlord out of fear. Renting out a portion of your home is a second job, and it fundamentally changes how you live in your space. Our professional recommendation is to let us run the numbers on a straight switch first. You might find that securing a rate even half a percent lower through another lender, combined with stretching your amortization back out to 25 or 30 years if eligible, can shrink your payment shock to a manageable double-digit figure. If that still leaves you short, then you can start looking at the landlord route.
| Consideration | Renting Out a Suite | Switching Lenders (Straight Switch) |
|---|---|---|
| Upfront Cost | High (renovations, permits, legal suites) | Zero to minimal (standard switch fees) |
| Qualifying Rules | Must meet rental income guidelines if refinancing | No stress test required (for straight uninsured switches) |
| Lifestyle Impact | High (sharing your living space, landlord duties) | None (just a different name on your mortgage statement) |
| Financial Relief | Ongoing monthly rental income | Immediate reduction in monthly interest costs |
Frequently Asked Questions
Can I switch lenders at renewal if I am struggling to afford my mortgage?
Yes. If your mortgage is uninsured and you perform a straight, stand-alone switch to another federally regulated lender, you do not have to pass the mortgage stress test. This makes it much easier to move your mortgage to a lender offering a lower rate and more affordable payments.
Is it possible to refinance my mortgage to build a rental suite in Ontario?
Under federal rules, you can refinance an insured mortgage up to a home value of $2,000,000 to construct a secondary suite. However, you must use the suite as a long-term rental (no short-term rentals allowed), and not all lenders offer this specific refinancing product yet.
What is the current Bank of Canada overnight rate and how does it affect renewals?
As of June 2026, the Bank of Canada overnight policy rate is held steady at 2.25%. While this rate directly influences variable-rate mortgages, fixed mortgage rates are driven by Government of Canada bond yields. When you renew, your new rate will reflect these current market conditions, which are higher than they were five years ago.
Do I have to pay a penalty to switch lenders at the end of my term?
No. When your mortgage term naturally expires, you can switch to another lender without paying any prepayment penalties. You only need to give your broker enough time (typically 60 to 90 days before your renewal date) to arrange the transfer smoothly.
Weighing your options for an upcoming renewal? Let our team do the heavy lifting and find the best path forward for your budget. Contact us today or call our office directly at 905-455-5005 to get started.
About the Author: Neil Drepaul in
Neil Drepaul is a Co-Owner and Mortgage Broker at Canadian Mortgage Services. With over 13 years of experience in the Canadian lending industry, Neil brings a strong entrepreneurial spirit to every client interaction. He specializes in helping homeowners and buyers find mortgage solutions that fit their real-life goals, not just their paperwork. His approach is straightforward: serve others first, and success follows.