Annual Mortgage Portfolio Review | Investor Guide

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Why an Annual Review Is Essential

The Canadian mortgage market is dynamic. Interest rates fluctuate with Bank of Canada decisions, lenders regularly adjust their policies and programs, and your property values evolve with the local real estate market. An investor who does not annually reassess their debt structure risks leaving money on the table or maintaining conditions that have become unfavourable. The annual mortgage portfolio review is the financial equivalent of a preventive medical exam: it detects problems before they become costly.

Elements to Analyze

Rate comparison: For each loan, compare your current rate to prevailing market rates. If the gap is significant (typically 0.50% or more), refinancing or transferring could be profitable even factoring in the penalty.
Amortization analysis: Check the principal repayment progress on each loan. A shorter amortization accelerates equity building but increases monthly payments. Assess whether the current amortization period is still aligned with your goals.
Available equity calculation: Estimate the current market value of each property and subtract the mortgage balance to déterminé accumulated equity. Significant equity can be mobilized to finance new acquisitions through refinancing or a HELOC.
DSCR évaluation: Calculate the debt service coverage ratio for each rental building: net operating income divided by annual debt service. A DSCR above 1.20 is generally considered healthy by lenders.
Renewal calendar: Review the maturity dates of all your terms. Identify staggering opportunities (see capsule E3.4.1) and start shopping rates 120 days before each maturity to maximize your negotiating power.

Identifying Optimization Opportunities

The annual review can reveal several types of opportunities. If a property's value has significantly increased, refinancing could free up equity for a down payment on a new building. If a loan carries a rate well above market and the prepayment penalty is reasonable, transferring to another lender could generate substantial savings. If a building's DSCR has improved thanks to rent increases, the current lender may be willing to offer better conditions.

Debt Service Coverage Ratio (DSCR): A financial indicator that measures a rental building's ability to cover its mortgage obligations. It is calculated by dividing net operating income (gross revenue minus operating expenses, excluding debt service) by total annual mortgage payments (principal and interest). A DSCR of 1.20 means net income covers 120% of debt service.

The Broker: Your Review Partner

A Quebec mortgage broker, regulated by the Autorité des marchés financiers (AMF), has the tools and relationships needed to conduct this review effectively. They can access programs from dozens of lenders, calculate refinancing scenarios including penalties, and produce a comparative report enabling informed decisions. The goal of the annual review is not necessarily to change everything, but to have a clear picture of your portfolio's performance and the levers available to improve it. By scheduling this review every year with your broker, you ensure your mortgage strategy stays aligned with your long-term investment objectives.

Frequently Asked Questions

How often should I review my mortgage portfolio?

A minimum of once per year is recommended. Ideally, schedule this review at the beginning of each calendar year or a few months before one of your mortgage renewals, to allow time to negotiate or restructure as needed.

What elements should be checked during the annual review?

Key elements include: each loan's interest rate compared to current market rates, the remaining balance and amortization progress, equity accumulated in each property, the debt service coverage ratio (DSCR), upcoming renewal dates, and applicable prepayment penalties.

Is it worthwhile to refinance mid-term?

It depends on the gap between your current rate and market rates, the prepayment penalty amount, and the remaining time on the term. Your broker can calculate the break-even point to déterminé whether refinancing generates a net saving after penalty.

How can accumulated equity be optimized?

Excess equity in a property can be unlocked through refinancing or a home equity line of credit (HELOC) to finance new property acquisitions, fund value-adding renovations, or consolidate higher-rate debts.

Why work with a broker for the annual review?

The broker has access to dozens of lenders and knows each one's current policies. They can quickly identify loans that could benefit from a better rate, a structural change, or a transfer to another lender, and quantify the potential savings for each adjustment.