Refinancing Risk vs Rate Risk: What Investors Overlook in 2026

You’re Worried About the Wrong Thing

Most investors are still glued to Bank of Canada rate announcements, praying for a cut. Rates matter, but they aren’t what destroys portfolios. Refinancing does.

In 2026, the real danger is debt rolling over at maturity. That’s when the gap between old assumptions and new realities comes due — and it’s forcing owners into fire sales.

Rate Risk vs Refinancing Risk: What’s the Difference?

• Rate Risk: The risk that interest rates go higher than you planned.

• Refinancing Risk: The risk that when your mortgage matures, the new debt terms blow up your deal — even if rates haven’t moved.

Refinancing risk kills more investors than rate hikes.

Why Refinancing Risk Is Worse in 2026

• Short-Term Debt from 2021–22 Is Maturing. Investors who financed at 2% are now facing 5% renewals.

• Loan-to-Value Ratios Have Shifted. Lenders are demanding more equity. Many owners don’t have it.

• Appraisals Are Lower. Properties bought at 2021 peak prices won’t appraise at the same level in 2026.

The result? Owners are forced to either inject capital or sell at a discount.

Case Study: The 2021–2026 Reset

• 2021 Purchase: $5M 24-unit building at a 3.25% cap rate.

• NOI Today: Flat at $220K (expenses grew, rents barely kept up).

• 2026 Renewal: Lender requires $500K equity injection + higher interest.

The owner doesn’t have the cash. Forced sale. The buyer who comes in today picks up the building below replacement cost.

How to Manage Refinancing Risk as an Investor

• Know Your Maturity Timeline. Don’t guess. Map out every debt maturity across your portfolio.

• Stress Test Today. Underwrite renewals at today’s rates plus 1%. If your deal doesn’t hold, fix it now.

• Build Reserves. Have cash or lines of credit ready for equity injections.

• Target Owners Under Pressure. Other investors’ refinancing risk is your opportunity.

Why This Matters More Than Rate Cuts

Even if the Bank of Canada trims rates by 50 bps, refinancing pressure doesn’t vanish. Loan-to-value requirements and lower appraisals still force equity injections. Rate cuts don’t save bad deals.

Investor Playbook

• Stop obsessing over rate headlines.

• Track refinancing timelines and equity gaps.

• Forced sales are created by refinancing pressure, not rate changes.

• Investors with dry powder will find 2026’s best deals in these stress points.

• OntarioMultifamily.ca connects you directly with the professionals sourcing these opportunities before they hit the open market.