Reading the Canadian news these days can cause no short amount of anxiety. However, in the trenches of the home-building industry, creativity and innovation are hard at work, finding ways to address the deficit in Canadian home supply. One example of this is “Val” – a robot designed to lift more than 440 pounds and do the work of about 20 tradespeople. Horizon League CEO describes Val’s task as “most of the heavy lifting, repetitive work” – or the jobs that people simply don’t want to take on. Val’s operators are still working on maximizing efficiency in the hopes that work will take place about twice as fast as it is now and programming for other tasks can take place as well. Canada has a goal of building millions of homes in the short-to-medium term future, and robotics and other forms of automation will move to the forefront.
One possible benefit of this automation is a drop in labor costs for construction – and a drop in eventual purchase price for homes. Another key factor in the cost of home buying is the mortgage rates Alberta lenders are asking for. Let’s take a look at what we can expect to see Alberta mortgage rates (and elsewhere in Canada) do in 2025.
What to Expect from Mortgage Rates in 2025
According to WOWA, Alberta mortgage rates sat at 4.15% for a five-year variable on March 11. They project that rate to drop to 3.55% by 30 June and then to 3.3% by the end of the year. Some of this optimism has to do with the sense that inflation has slowed down and that central banks can make credit easier to access once again. WOWA actually project this number to stay at 3.3% until the last half of 2027, when they project, it will start to rise once again.
Obviously, there is some uncertainty as far as the Canadian and global economy right now. One reality of reciprocal tariffs between the United States and Canada could involve elevated costs in the area of home construction and other sectors of the economy. So, for people looking to buy their first home and take on that first mortgage, it will be important to make sure that income streams are secure and that a budgeted payment is well within your means. If you’re coming to the end of a term, though, and not planning to move, then let’s get into whether to refinance mortgage terms or stay with a renewal mortgage makes more sense for you.
Should You Refinance or Renew Your Mortgage in 2025? Key Considerations
In Canada, you can’t take out a loan with a term longer than 10 years. However, many mortgages are amortized over a 30-year period, and the interest rates for 10-year loans are usually significantly higher than shorter loans. For example, the average 10-year fixed-rate mortgage in Canada today is 7.09% — well higher than the five-year variable rate (4.15%). The five-year fixed-rate mortgage is even lower (3.89%) although it is expected to stay largely static through the middle of 2026. So, while a 10-year loan might give you more peace of mind as far as dreading the renewal process, you’re going to pay a lot more over the course of the loan. Either way, unless you come into a windfall of cash, you’ll be renewing your loan (or refinancing it as each term comes to an end) multiple times. Which one makes more sense?
Keeping a renewal mortgage just means signing a new contract when your current mortgage deal hits maturity. You’ll get notification from the lender with the new mortgage rates Alberta or other provinces are offering at that time and choices for the new length of term. You might be able to re-amortize the mortgage at this time, depending on the lender. If your credit has improved over the course of the loan, then you might be able to negotiate a more favorable rate. You could also adjust the payment frequency and/or monthly date if you would like to.
The other choice is to refinance mortgage obligations, most frequently with another lender. You’ll have to go through the original process again with a refinance mortgage. This involves running your credit report, providing proof of income, going through the mortgage stress test, have an appraisal, and deal with closing costs.
The benefit of refinancing as opposed to renewal mortgage is that you have an easier time extending your amortization or taking some cash out if you’ve built enough equity. You can also refinance at any time if the right deal arises, instead of waiting for your existing mortgage term to come to an end. However, if you refinance in the middle of a mortgage, that’s technically violating your original deal, so there is likely to be a prepayment penalty and other fees. If you wait until the renewal period to refinance, you won’t face prepayment penalties.
So why would you choose renewal mortgage?
- You’re happy with your current deal. Do you like your current mortgage terms? Is the lender easy to deal with? You’ll get a statement at least 21 days ahead of your renewal date with a statement indicating the new rates and term choices. However, you might want to start looking around because you can lock in a rate as far ahead as 120 days ahead of time. That will give you leverage with your current lender.
- You can still negotiate for lower rates. If the renewal statement has a rate higher than you want to pay, you can get in touch with your lender or go through a mortgage broker and try to bring that number down. If your credit score has improved, you’ll have more leverage.
- You don’t want to pay fees or deal with the hassle of refinancing. Renewal mortgage processes don’t cost a single Loonie. If you’re happy with the details of the statement (rate and term), you may only need to make sure your auto-draft is still set up correctly for payments going forward.
So why would you choose to refinance mortgage terms?
- You want a longer amortization period. This will bring your monthly payment down, but it will make your mortgage last longer – and you’ll end up paying more in interest. Your principal (amount owed) won’t change, but you’re adding to the time that you take to pay it back, so that means more interest.
- You want to take out cash from your equity. If you’ve built up equity in your home and want to use it – whether for a renovation on the house, college expenses for your children, a second home to use for rental income, or another purpose – a refinance will allow you to take some of that out. You can’t take out all of your equity because of LTV (loan-to-value) ratio requirements, but if you’ve been paying on this loan for more than few years, you should have some significant equity that you can use.
- You want a lower interest rate, and your existing lender won’t work with you. Did you improve your credit score? Then your existing lender is likely to give you a lower rate. If they won’t budge, though, and you found a better deal somewhere else, refinancing could work. Remember to factor in the closing costs and other fees associated with refinancing when you’re calculating the amount of money that moving your loan would save.
Home Equity Loans vs Reverse Mortgage vs Private Reverse Mortgage: Which One is Best for You?
Home equity is one of the top reasons to buy a house instead of renting. Owning a home means taking responsibility for repairs and upgrades over time, but when you come to the end of your mortgage, you’ll have an asset that you can pass on to your children if you don’t need to access the cash you’ve invested in it.
There are times, though, when people want to access the money, they’ve paid into their home. A home equity mortgage or home equity line of credit (HELOC) is one way to do this. Another way, primarily for senior citizens, is a reverse mortgage. Let’s go over how each one of these works and discuss the pros and cons of each.
If you’re 55 or older, then a reverse mortgage might work for you. Your loan takes the form of turning a part of your home equity into tax-free income, sometimes called an “equity release.” Generally, the maximum of this is 55% of the current home value, but the exact cap depends on your age and the age of other people on the title, your lender, and your home’s appraised value, type and condition. It has to be your primary residence. You’ll generally pay a higher interest rate for a reverse mortgage than a home equity mortgage or HELOC because as long as you’re alive and living in the home, you always have the right to stay in your home.
A home equity mortgage or HELOC comes without limitations for use. With a home equity loan, you’ll have set monthly payments – in addition to your payments on your first mortgage. If you get a HELOC instead, you have access to a set amount of money, but you only borrow the money you need, when you need it, instead of taking a lump sum and starting to owe on money you don’t necessarily need yet.
Unkown to many is Private Lender Reverse Mortgages. At the time of this writing, this unique product is available in Major Canadian Cities in BC, Alberta and Ontario where Age is not a factor, with lending up to 50% of the property value provided the property is your primary residence and qualified residential property. The maximum term is 48 months and can be paid out at any time.
You’ll want to determine which of these works best for you. Amansad Financial does not assist with HELOC or standard Reverse Mortgages for 55+.