Real Estate

My mortgage is about to go up by at least $1,000 a month

“We hadn’t seen rates change much, and the consensus was that low rates were here for a long time to come. That was wrong, of course.”
Michelle Harris
4ZWoD0POSCSFWcK9hg4xeA

In July 2019, my husband Brad and I moved with our three kids from Sooke, a small town 45 minutes’ drive west of Victoria, into the city itself. We wanted to be closer to our jobs—Brad is an electrician and I’m an education assistant—and we also wanted more opportunities for our kids, who are now 17, 15 and 11. The city had better schools and more extracurricular activities, and we also wanted to live in a community with more people close by. And that’s exactly what we got. Our new house was located on a quiet cul-de-sac in a nice suburban neighbourhood, near the beach, parks, schools and great walking trails. There are lots of families nearby with kids the same age as ours, and some of them have become very close, like family. 

The house cost $759,000, but that gave us about 3,000 square feet, with four bedrooms and an unfinished basement. We saved up for a renovation, and completed it bit by bit, adding a fifth bedroom, a media room and a bathroom down there. Each of my kids now has their own bedroom, and we have an extra room for guests. But all that extra space has come at a cost we didn’t anticipate at first. 

READ: The Move: Why two pilots willing to put down roots anywhere in Canada landed in Calgary

When we bought the house in July 2019, interest rates were nearly at all-time lows. We took out a $520,000 mortgage, and our first term was a fixed-rate, four-year term at a rate of 3.04 per cent. The monthly mortgage payment was about $2,400. That didn’t leave much left over after the usual bills, insurance, gas, food and property taxes, plus extracurriculars for the kids—one is in band, another is in swimming. But we’d been homeowners since 2014, we hadn’t seen rates change much, and the consensus was that rates would stay low for a long time to come. 

That was wrong, as everyone knows now. In the spring of 2022, rates started to rise, and I started to worry about just how high they’d go by the time we renewed the mortgage for a new term in July 2023. I reached out to my mortgage lender—one of the big Canadian banks—to find out if we could break the mortgage early, to lock in the then-current rates for a longer period. They wanted $12,000 to break it early, which we just couldn’t afford.

So we waited and watched. By fall, rates had hit five per cent. That would mean $850 more per month—$3,250 a month, almost $40,000 a year, just to keep the roof over our head. And rates were still rising. I called the bank again. Now they said the penalty to break the mortgage would be equivalent to three months’ interest, about $3,400. I’d have done that in spring if possible, but now the representative on the phone told me it would be foolish to do so—she said I was being irrational and overreacting, that rates wouldn’t keep going up like this, and I should just wait until July to refinance, as planned. Her rudeness alone made me not want to re-sign with the bank.

RELATED: My Prediction: Rent-to-own will transform how Canadians buy and sell homes

I reached out to our mortgage broker, and he was frank: “There’s not much you can do. Hold out and we’ll hopefully find you a better rate in July.” So we’ve been exploring options. One alternative lender, a subsidiary of a big bank, said they could maybe get me 4.5 per cent. But our mortgage broker said that wasn’t possible because our mortgage isn’t insured—we paid more than 20 per cent down when we bought the house, which seemed responsible at the time. But because mortgages with higher down payments aren’t required to be insured, we didn’t get it, and now we don’t qualify for the lower rate. It’s been really frustrating to learn on the fly how this all works, when so much is on the line.

Mortgage rates are now around six per cent, and while the Bank of Canada has tentatively paused further hikes, there could even be more to come this year. Even as it stands, when we renew in July, our mortgage payments will go up around $1,000 per month, overnight. 

We already live frugally, not a lot of frills, no holidays, rarely eating out or splurging. $1,000 a month will push us to the edge. If someone gets sick or hurt and can’t work, there’s nothing to fall back on—and we need more income to avoid losing the house. Brad’s employer doesn’t allow side gigs, so I’ve already taken two extra jobs. I’m taking over some caregiver responsibilities for a neighbour’s family member, and last summer, when school was out, I started doing wedding decorating. The latter eats up 15 to 30 hours per week in the summer, but brings in more money than not working at all for two months, which is the case for education assistants. I’ll do it again this summer. 

In September, we’re also going to host an international student in our house. That’ll bring in $975 a month, but it’ll also mean more work and expenses—providing food and transportation, ensuring they have a good experience in Canada. In the end, it’ll probably mean a couple hundred dollars extra to cover some monthly expenses. 

All in all, we’ll be working basically all the time—but at least we’ll get to stay in our home.

MORE: My Prediction: Rent-to-own will transform how Canadians buy and sell homes

I’ve heard people ask: why don’t you just downsize? The answer is that the market has changed so drastically that it wouldn’t be much more affordable. With the costs of selling and moving, we’d probably end up paying a similar amount for a smaller house, and we’d have to uproot our lives for it. Some friends have moved to Alberta, where it’s cheaper, and we considered it. Brad’s from southern Alberta, and my dad lives in Edmonton. Last September, we looked at house prices in Lethbridge, which is even cheaper than the large cities there, and we realized we could sell our house here and be mortgage-free there. 

We were days from listing our home, but we started to do the math and realized that it wasn’t as good as it looked. Selling and relocating would end up costing us around $100,000—lawyers’ fees, movers, commission to the realtor (which we hadn’t thought of). Some regular costs, especially home heating, would be way higher. In Victoria, we don’t have to drive everywhere; we would in Lethbridge, adding more costs. Salaries in my field are lower in Alberta, and there are no jobs available anyway, so we’d be living off one income. Brad’s pay as an electrician would have gone down too. We would have ended up in the same position: barely enough to get by, while freezing on top of it!

And the kids didn’t want to move. There were tears. We all love it here, we’re happy here, but we felt desperate, out of options.

I’m grateful that I own my house. I know people who are renting and have even less stability. The cost of everything is rising: housing, gas, food, insurance. I estimate our spending has gone up by a minimum of $500 a month just from inflation, but wages are standing still. Right now, I’m hoping for a miracle. I’ve told people I’d take a shady mortgage, if there were such a thing. I just need to not pay $3,500 just to live. We recently decided we’ll take the risk and get a variable-rate mortgage when we renew—we run the risk of rates going even higher, but there’s a better chance they’ll fall, hopefully within a year. We think it will mean having a high rate for a shorter period of time compared to a very high fixed rate for four or five years. We’ll shop around and wait until the last minute to get the best rate. 

My biggest fear is that we’ll be forced to sell the house. But we’re hoping these side gigs will get us by, and that rates will drop soon. At this point, we’ll do anything to make it work.

 

— As told to Andrea Yu

This article contains affiliate links, so we may earn a small commission when you make a purchase through links on our site at no additional cost to you.