Staggering Mortgage Renewals | Investor Guide

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When a real estate investor holds multiple properties in Quebec, having all mortgages come due at the same time represents a major risk. If interest rates have risen significantly at the time of simultaneous renewal, the impact on cash flow can be devastating. The staggering strategy involves spreading renewal dates across different years or different periods of the year to limit exposure to a single rate environment. For example, an investor with four buildings could choose 2-, 3-, 4-, and 5-year terms so each loan renews at a different time. In Canada, the Office of the Superintendent of Financial Institutions (OSFI) Guideline B-20 requires a stress test at renewal for uninsured mortgages transferred to a new lender, adding another risk factor at renewal time. A mortgage broker can play a key role in planning this strategy by analyzing the client's overall portfolio and recommending the most advantageous term combination based on anticipated market conditions.

The Risk of Simultaneous Renewal

A real estate investor holding multiple rental properties in Quebec faces an often-underestimated risk: the simultaneous renewal of all mortgages. When all terms come due at the same time, the investor is fully exposed to prevailing market conditions. In a rising rate environment — such as that seen in Canada between 2022 and 2024 when the Bank of Canada's policy rate rose from 0.25% to 5.00% — this concentration can turn a profitable portfolio into a source of losses.

The Staggering Principle

Staggering mortgage renewals works on the same principle as diversifying a bond portfolio with varied maturities (a "ladder" strategy). By choosing different terms for each property, the investor ensures only one mortgage — or a limited number — renews in any given period. This smooths the impact of rate fluctuations across the entire portfolio and maintains cash flow predictability.

Take inventory of your portfolio: List all your mortgages with their maturity dates, balances, current rates, and penalty conditions. Identify date clusters that represent concentration risk.
Define a target schedule: Spread renewals so that only one loan (or a minimal number) comes due each year. For example, for four buildings: terms of 2, 3, 4, and 5 years.
Consider selecting appropriate terms: Select each loan's term based on the current yield curve, your rate outlook, and your risk tolerance. Consult your broker to evaluate the advantage between a short term (2-3 years) and a long term (5 years).
Reassess annually: At each renewal, adjust the strategy to new market conditions. The term chosen for the renewing loan should maintain the portfolio's overall staggering.

The Stress Test at Renewal

Under OSFI Guideline B-20, borrowers who stay with the same lender at renewal are generally not subject to a new stress test. However, those who wish to transfer their uninsured mortgage to another lender for a better rate must requalify at the higher of the contract rate plus 2% or the 5.25% floor rate. Staggering offers an additional advantage here: by renewing only one loan at a time, the investor retains the flexibility to shop among multiple lenders without risking being locked in with a single provider for the entire portfolio.

The Mortgage Broker's Role in Staggering Strategy

The mortgage broker is the professional best positioned to orchestrate an effective staggering strategy. They have a full view of the market and can compare offers from dozens of lenders for each individual renewal. The broker can also calculate the cost-benefit of an early renewal (with prepayment penalty) to reposition a term and correct an imbalance in the schedule. In Quebec, brokers are regulated by the Autorité des marchés financiers (AMF) and must act in their client's best interest under the Act respecting the distribution of financial products and services.

Frequently Asked Questions

Why is it risky to renew all mortgages at the same time?

If all your loans come due simultaneously and rates have risen, your payments could increase significantly across your entire portfolio, drastically reducing your liquidity and profitability. By staggering, you only face a partial increase at each renewal.

How can I stagger renewals when buying multiple properties at the same time?

You can choose different terms for each property at purchase. For example, a 3-year term on one building and a 5-year term on another. You may also consider opting for early renewal on certain loans with a penalty if the long-term gain justifies the cost.

Does the OSFI stress test apply at renewal?

If you stay with the same lender, the B-20 guideline stress test generally does not apply at renewal. However, if you transfer your uninsured mortgage to a new lender, the qualification test at the higher of the contract rate plus 2% or the 5.25% floor rate will apply.

Can a mortgage broker help me plan staggering?

Absolutely. A mortgage broker analyzes your entire portfolio, maturity dates, current rates, and market trends to recommend an optimal renewal schedule. They can also negotiate suitable terms at each new financing or renewal.

What is the ideal term combination for a four-property portfolio?

There is no single answer, as it depends on market conditions and your risk tolerance. A common approach is to spread terms equally (2, 3, 4, and 5 years) so only one building renews each year. Your broker can adjust this strategy based on current yield curves.