Plenty of homeowners are facing trying times across Canada as mortgages come up for renewal this year at much higher rates than they originally signed for during the pandemic-era lows.
That renewal wave has left many worried about the prospect of managing significantly steeper mortgage costs while also handling other payment and debt obligations – and some are scrambling into less-than-ideal borrowing solutions as a result.
But instead of having borrowers jeopardize their financial future further by doing anything they can to keep their current home, mortgage brokers have a responsibility to have hard conversations and see whether it might make sense for clients to “right-size,” according to a prominent Ontario broker.
Tracy Valko (pictured top), founder and CVO at Valko Financial, told Canadian Mortgage Professional that with many borrowers at renewal time seeing their home valued either at or below what they purchased for, refinance opportunities were thin on the ground.
“They’ve got too much debt. Could they manage it? Potentially, but I think they’re exhausted from having debt and managing it every day that they have to sell – and don’t want to sell,” she said. “I call it right-sizing to what your financial position is right now instead of downsizing.
“It’s a mindset for people who are already stressed: ‘Let’s talk about right-sizing to where you’re at right now with your income. Let’s alleviate all this debt by paying it off when you sell your home and then start again with a minimum downpayment – just a smaller home.’”
The fact that many markets have swung decisively into buyer’s territory, Valko added, is also giving those clients the ability to negotiate when choosing a new home, rather than getting locked into a bidding war and potentially having to overpay.
‘If you can start again and build up again… there’s nothing wrong with that’
The value of brokers at renewal time has come into clear focus once again this year with clients struggling for options. But she underlined the responsibilities also facing brokers to do the right thing for borrowers instead of focusing on their own bottom line.
“No one situation is the same as the next and we have to really understand our products and understand what’s in the best interest of the client – not just place them in a second mortgage at 18% or 15% and thinking that’s a good thing,” she said. “Sometimes selling and buying is the new refinance. Listen, I’ve had some hard conversations… and my heart goes out to them.
“But at the end of the day, I’m a big believer in homeownership and I also care about people first. And I sit there thinking that you can always start anew. But to sit in financial stress for another five years? That’s five years you can’t get back of your life, your health. And what’s the point if you can start again and then build up again? There’s nothing wrong with that.”
Understandably, staying in a home even during tough financial times is always a top priority for Canadians. But for Valko, there’s little point in setting a customer up with a lender on an exorbitant interest rate if it just means further hardship down the line.
“I don’t even understand how they’re getting them to qualify because it’s well over and above their debt service ratios,” she said. “But these clients are just going to sit and suffer, and I think there’ll be an end date for them on it because you can’t continue that way.
“We have to understand our first priority is what’s in the best interest of the client, not what’s in the best interest for how much income we’re making or the profits or the lender, or making sure that we reach our quotas on how many deals we send in. It’s what’s in the best interest of Canadians.”
Canadian Mortgage Summit fast approaching
Valko is set to chair a panel on how brokers can leverage artificial intelligence and automation in their business at the upcoming Canadian Mortgage Summit, scheduled for September 17 at Brampton’s Pearson Convention Centre.
She described that event – free to attend for brokers – as an invaluable way for the industry to gain insights into the best ways to navigate the current landscape and prepare for growth in 2026.
“It’s bringing the tools for what we really need to do to pivot our business into the end of this year and next year,” she said. “It’s bringing those key insights that we need to have and to educate ourselves so that we can have tighter policies and programs and market strategies for us as brokers and agents so that we can still survive and thrive in these challenging times.”
CMP
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