Higher interest rates can cut both ways.

The upside is you earn more on high-interest savings accounts.

The downside is you potentially pay more on your mortgage and home equity line of credit (HELOC).

The latter is a bummer for many homeowners, who may now be facing renewing their mortgage today as their term runs out.

It turns out that could be a lot of folks given 2018 was a busy year for mortgages as it was amid a previous rising rate environment.

In retrospect, it’s laughable the commotion caused over central banks hiking rates about 100 basis points back then versus the 425 beeps we experienced in less than 12 months.

All the same, a lot of borrowers today are looking to renew or even refinance for a variety of reasons, says Winnipeg mortgage specialist Aaron Brager with Castle Mortgage Group (an association of TMG).

He notes many five-year, fixed term mortgages written in 2018 had interest rates around 3.5 per cent, “and a lot of those are now coming up for renewal.”

Today, these borrowers are facing a shock to their personal financial systems as the best fixed-rate, five-year terms start about 100 basis points higher. That’s about 4.5 per cent.

In cash terms, homeowners could be paying about $55 more per month per $100,000 of money borrowed, he adds.

Of course, homeowners with variable-rate debt—be it an adjustable mortgage or a HELOC—have already been feeling this pain.

Albeit Winnipeg homeowners are feeling less bite than those in Toronto where the price of a bungalow can cost more than $1 million.

For those homeowners with a variable rate, they could be paying nearly $2,000 more in interest a month.

That said, many borrowers from the big banks and credit unions likely have been able to stretch out their amortization rather than increase monthly payments.

But in these larger centres with higher housing costs, some borrowers are facing situations where their monthly, fixed payments only pay interest with nothing toward principal.

This has caught the federal government’s attention with it promising in this year’s budget to implement a code of conduct to protect Canadians with existing mortgages, says James Laird, co-chief executive officer of Ratehub.ca, an online marketplace for mortgages and HELOCs.

“But it sort of feels like the feds have written down a lot of the accommodations and options lenders were already offering Canadians.”

Some items mentioned in the code—which has yet to be finalized—are the ability to skip a payment, which most lenders already offer, he notes.

“Generally, how this works is you call the lender and tell them what’s going on, they work with you to find a solution,” Laird says.

“It’s only where there is no clear way for the financial hardship you are experiencing might get better that they may not be as accommodating.”

The short answer is lenders don’t want to foreclose.

But let’s suppose you’re one of those folks with a mortgage up for renewal, or you want to refinance and roll other debt into your mortgage.

The easiest path is renewing with the same lender.

“That simply involves going to their current lender and signing a document without any re-qualification to renew at the best rate it offers—basically set it and forget it,” Brager says.

But are you getting the best rate?

Probably not, he adds.

“The big six banks and the credit unions typically charge rates a bit higher than monoline lenders,” he says, noting the latter mostly focus on mortgage lending.

The upside of shopping around is you can get a mortgage potentially 100 basis points (a percentage point) less than one offered by a big bank, he explains.

The downside is you would have to requalify—though that hassle is far outweighed by interest savings.

Another choice is refinancing—which you can do with your existing or a new lender.

“A refinance is when you borrow more money because you have enough equity in your home to do it,” Brager says.

This is particularly popular with homeowners looking to renovate, buy a new car, pay for an adult child’s wedding or eliminate high-interest credit card debt, says Alana Riley, head of mortgage, insurance and banking at IG Wealth Management.

“Even though rates right now are higher, they are still very competitive versus higher interest rates associated with credit cards and other debt.”

Borrowers have a few ways to go about refinancing too—from borrowing on a HELOC to increasing their mortgage and monthly payments.

“In a refinance, you also can stretch out the amortization to 30 years,” Brager says, noting homeowners can borrow up to 80 per cent of the value of their home.

Those locked into their term midway could also look at getting a second mortgage with set monthly payments, opposed to a HELOC where you only need to make interest-only, Riley says.

“That could give you the flexibility to pay off some higher debt by consolidating it at a lower interest rate without having to give up the good interest rate you have.”

Of course, another consideration for borrowers is the choice between variable and fixed rate as well as the length of the term.

Most clients are choosing a fixed rate, Brager says.

“The five-year fixed offers the best rate, but the three- and four-year terms are also attractive.”

What’s crucial either way is to get advice from a mortgage specialist and a financial planner, Riley says.

A recent survey by IG found 78 per cent of Canadians believe choices around home financing should be considered within their financial plan.

“But less than 30 per cent actually consult a financial planner,” she says.

Further to that point, big decisions regarding a mortgage should not be made in isolation.

“It’s not just about the mortgage,” Riley says. “It’s about making a decision that fits within your overall financial plan.”