Underwater on your mortgage?
You can still stay —
here’s how.
Negative equity doesn’t force you out at renewal. We’ll confirm your real options, negotiate your best rate, and only recommend a move when you genuinely come out ahead.
Negative equity means your mortgage balance exceeds your property's current market value — also called “being underwater.” In Canada, institutional lenders won't refinance negative equity, but options exist: private lenders may bridge if the shortfall is small and the borrower has strong income; selling and carrying a loss with the bank's consent (a short sale) is uncommon but possible; waiting for appreciation is often the best strategy in recovering markets.
Four things you can still do
when you’re underwater.
Negative equity blocks refinancing and usually blocks switching. It does not block renewing, re-amortizing, or getting hardship relief.
You can almost always renew
At maturity, your current lender can renew your mortgage without a new appraisal or stress test, even with negative equity. You are not forced out. Negative equity limits switching and refinancing — not renewing.
Lower the payment — re-amortize
Ask your lender to extend the amortization at renewal. The longer repayment period reduces your monthly payment substantially. A blend-and-extend can also soften a rate jump. More total interest, but real breathing room now.
Hardship options before arrears
Federally regulated lenders must consider relief — interest-only periods, payment deferrals, extended amortization — when asked before you miss a payment. Those options are far easier to arrange before you fall into arrears.
Equity rebuilds as you hold
Stay current, make lump-sum payments within your prepayment privileges, and let the market cycle. Most negative-equity situations resolve without a forced sale for owners who can hold through the dip.
What to do —
in order.
For most homeowners who can still make the payment, steps 1 and 2 are enough. The rest are for harder situations.
Renew with your current lender (don't switch)
At maturity you can almost always renew with your existing lender without a new appraisal or re-qualifying, even if you're underwater. Switching lenders needs a new appraisal and approval, and an uninsured mortgage generally can't be moved above 80% of the new appraised value, so a straight renewal is usually your path. If your mortgage is insured (under 20% down), a switch at maturity may still be possible; ask a broker to check. Still ask your current lender for their best rate.
Ask to re-amortize to lower the payment
If your renewal payment jumped, ask whether your lender will extend the amortization back out to reduce the monthly amount. Some will at renewal, within their own and (for insured mortgages) the insurer's limits. A blend-and-extend may also help.
Talk to your lender BEFORE you miss a payment
If the payment is unaffordable, contact your lender early. Federally regulated lenders are expected under the Canadian Mortgage Charter to consider relief, such as a temporary amortization extension or a changed payment schedule. Some also offer short deferrals or interest-only periods. Missing payments silently leads to arrears and power of sale.
Don't sell into a down market unless you must
Selling while underwater crystallizes the loss — you'd have to cover the shortfall between the sale price and your balance in cash. If you can hold and afford the payment, paying down principal rebuilds equity, and values may recover over time, though no one can promise when.
Get independent, licensed advice early
An FSRA-licensed broker can confirm your real renewal options and whether any lender will take the file; a Licensed Insolvency Trustee handles a consumer proposal or bankruptcy if debts go beyond the mortgage. Avoid 'rescue' offers that aren't licensed.
We can help across
many situations.
Tap any situation below to see how we approach it.
If you’re…Your home value dropped and you're coming up to renewal
Your home value dropped and you're coming up to renewal
You can almost always renew with your current lender without a new appraisal or re-qualifying. Negative equity doesn't force you out at renewal. We'll confirm your options and negotiate your best available rate.
Get a free renewal reviewIf you’re…Your renewal payment jumped significantly
Your renewal payment jumped significantly
Ask your lender to re-amortize — extending back to 25 or 30 years lowers the monthly payment substantially. A blend-and-extend on the rate can also soften the increase. We model both options side by side before you decide.
Model my new paymentIf you’re…You want to switch lenders but have less than 20% equity
You want to switch lenders but have less than 20% equity
A direct switch needs a new appraisal and your balance generally can't exceed 80% of the new appraised value on an uninsured mortgage. If your mortgage is insured (under 20% original down payment), a switch at maturity may still be possible. We check both paths free.
Check if I can switchIf you’re…You want to consolidate debt but can't refinance
You want to consolidate debt but can't refinance
Refinancing (taking equity out) is capped at 80% of the appraised value — unavailable with negative equity. A private second mortgage exists as a last resort, but only makes sense with a clear exit plan. We'll tell you honestly which path fits your situation.
Explore consolidation optionsIf you’re…You're genuinely struggling to afford the payments
You're genuinely struggling to afford the payments
Contact your lender before you miss a payment. Federally regulated lenders must consider hardship relief — interest-only periods, deferrals, extended amortization. Those options are far easier before arrears. We can help you prepare the conversation.
Talk to an advisor nowIf you’re…You went through bankruptcy or a consumer proposal
You went through bankruptcy or a consumer proposal
There is a clear, well-trodden path back to a mortgage once you're discharged. The timeline depends on the type of proceeding and how you've rebuilt credit since. We've helped hundreds of clients through the re-entry process.
See my re-entry optionsPayment shock —
what re-amortizing can do.
Renewing at today’s rates after a low-rate term is a real jump. Here’s what extending the amortization does to the monthly number.
- Balance$460,000
- Old rate (expired)2.29% fixed
- New rate at renewal5.19% fixed
- Amortization20 yrs remaining
- Monthly payment~$3,065/mo
- Payment jump vs. old term+~$1,055
- Balance$460,000
- Rate5.19% fixed
- Amortization30 years
- Monthly payment~$2,510/mo
- Monthly saving~$555 vs. 20-yr
- New monthly payment~$2,510
Illustrative only — your balance, rate, and available amortization extension will differ. Lender and insurer limits apply. We compute your exact options before you commit.
Negative equity questions,
clear answers.
Renewal rights, refinancing limits, payment relief, and rebuilding equity — answered plainly.
Can I still renew my mortgage if I have negative equity?
Yes, almost always. At maturity you can renew with your current lender without a new appraisal and without re-qualifying or passing the stress test, even if you owe more than the home is worth. Negative equity does not force you out at renewal. What it limits is your ability to refinance (capped at 80% of appraised value) and to switch lenders, which needs a new appraisal. A straight switch no longer needs the stress test since November 21, 2024, but an uninsured mortgage generally can't move to a new lender above 80% of the new value. If your mortgage is insured (under 20% down), a switch at maturity may still be possible; ask a broker to check.
Why can't I refinance if my home value dropped?
Refinancing (increasing your mortgage or taking equity out) is capped at 80% of the home's appraised value with a prime lender, so you need at least 20% equity. If your value fell and your equity is thin or negative, you're above that limit, so a refinance or debt-consolidation-by-refinance isn't available. You can usually still renew your existing balance; you just can't borrow more against the home.
My renewal payment jumped a lot. What can I do?
First, ask your current lender whether it will re-amortize: extending the amortization back out lowers the monthly payment. A blend-and-extend can also soften the increase. If it's still unaffordable, contact the lender about hardship options before missing a payment. Avoid breaking the mortgage to switch, since that needs an appraisal you may not pass while underwater.
What happens if I can't make my mortgage payments?
Act early. Call your lender before you miss a payment: they can often arrange temporary relief (interest-only, deferral, longer amortization) and would much rather do that than pursue power of sale or foreclosure. If you fall into arrears, the lender can eventually force a sale. The single biggest mistake is staying silent; the second is taking a high-cost private 'rescue' loan instead of talking to your lender.
Should I declare bankruptcy or do a consumer proposal?
Those are decisions for a Licensed Insolvency Trustee, not a mortgage broker, and they depend on your total debt picture — not just the mortgage. They can provide relief but affect your credit and future borrowing. If the mortgage itself is the problem, renewal and hardship options usually come first. If you've already been through a proposal or bankruptcy, there's a clear path back to a mortgage once you're discharged.
Will my home value recover?
No one can promise a timeline, but real estate is cyclical and negative equity is usually temporary for owners who can hold through the down part. You can speed recovery by paying down principal faster (lump sums and accelerated payments within your prepayment privileges) and by not borrowing further against the home. The key is staying in the home and current on payments while the market normalizes.
We’ll try to beat your rate.
If we can’t, we pay you $500.¹
¹ Rate Beat: eligible Big-6 bank written offers only · same product, term & amount · $500 paid to you or your nominated charity at closing · conditions apply
Mortgage brokers across Ontario
Mortgage Squad advisors in every Ontario market help homeowners navigate negative equity situations.