Your mortgage is up for renewal, but you’ve just lost your job. What now?

One of the hardest experiences to go through in life is losing your job. It comes with stress, uncertainty, and many difficult financial decisions. This financial strain is compounded by the fear of losing your home. 

For many Canadians, this struggle has become all too real. In October, the unemployment rate climbed to 6.9%. What happens if you’re unemployed and need to renew your mortgage? 

Prioritize mortgage payments to maintain lender confidence, consider variable-rate options for flexibility, and use emergency savings if needed. If you’re in the middle of your term, ask about deferring payments as a short-term fix since lenders usually want to avoid foreclosure.  

Refinancing or getting better rates might have to wait until you’re working again, but staying informed will help you make the best choices. 

Learn more: What is the difference between power of sale vs foreclosure? 

Renewing your mortgage while unemployed  

Mortgage lenders don’t require proof of employment to renew a mortgage.  

As Leah Zlatkin, licensed mortgage broker and LowestRates.ca expert, explains, “the only reason they would check something is if you defaulted or you haven't been making payments. Then they may have a reason to look into you.”

This makes it important to prioritize your mortgage payments if you’re unemployed to avoid falling behind. Missing payments could trigger a review by your lender, which might complicate your ability to renew your mortgage.  

However, if you’re in a truly dire situation — like a career-ending disability or a complete inability to work again — you may need to consider selling your home. In this case, says Zlatkin, “you probably shouldn't have a mortgage.”  

Read more: What does it mean to be house poor? 

Can you renegotiate your mortgage rate while unemployed?  

The bad news, unfortunately, is that you may have to wait until you’re working again to shop around for a new mortgage rate. Most alternative lenders will require proof of steady income before offering you a new rate. 

“If your lender is offering you really terrible rates on your renewal and you can't go anywhere else because you're not going to qualify anywhere else, I would highly recommend choosing a variable product with your existing lender,” says Zlatkin. “Then move to a different lender once you find new employment.”  

While it might feel risky to choose a variable interest rate when your income is unstable — especially in today’s rising-rate environment — it offers a key advantage: flexibility. Variable-rate mortgages are less costly to break, making it easier to switch lenders or payment structures once your financial situation improves. 

Zlatkin advises against locking into a fixed-rate mortgage during unemployment because the penalties for breaking it are significantly higher. This could create an unnecessary financial burden if you need to make changes later.  

She also emphasizes the importance of tapping into your emergency savings if you have them. Most people with a mortgage and regular payments likely have some savings set aside. This is the time to rely on that emergency fund to keep your mortgage afloat until you’re in a more stable financial position. 

Related: All you need to know about fixed-rate mortgages and the interest rate differential 

Can I defer payments or refinance my mortgage?  

If your mortgage is up for renewal, deferring payments is not an option. This would require disclosing your job loss, which could jeopardize your ability to renew the mortgage. However, if you’re in the middle of your term, deferring payments may be a viable way to ease financial strain. 

“If you're calling the lender before you have that deferral situation, they're more likely to play ball with you because they want to help you,” says Zlatkin. “They don't want to foreclose on you.”  

Refinancing your mortgage, on the other hand, is much more challenging. It’s essentially like applying for a new mortgage, which means you’ll need to demonstrate financial stability. You should carefully review your finances and credit score, and gather any possible sources of income to prove you can make the payments. 

Without a job, however, refinancing may not be feasible. You may have to wait until you can provide proof of financial income before pursuing this option.  

Above all, don’t hesitate to seek professional advice. Mortgage brokers, financial advisors, and even your lender can provide guidance tailored to your unique situation. With the right support and strategies, you can navigate this difficult time and protect your home while working toward stability. 

Read next: What you need to know about transferring a mortgage