Toronto Negative Equity Mortgage: What to Do When You Owe More Than Your Home Is Worth

In 2021 and early 2022, it felt like Toronto real estate could only move in one direction. Prices were climbing month after month, bidding wars were the norm, and buyers rushed to lock in pre-approvals before rates rose again. By mid-2025, the landscape has changed.

According to June data from the Toronto Regional Real Estate Board, the average home in the Greater Toronto Area now sells for just over $1.1 million. That’s a decline of more than five percent compared to the same time last year. Condo prices have dropped as well, with the average now sitting at approximately $696,000, down 4.5 percent year-over-year. At the same time, interest rates remain elevated. Homeowners who bought at or near the market peak in 2022 or early 2023 may now find themselves facing an uncomfortable financial reality.

Understanding Toronto Negative Equity Mortgages

A Toronto negative equity mortgage refers to a situation where your mortgage balance is greater than your home’s current market value. This is sometimes called being “underwater.” While this can feel overwhelming, it is not permanent and in many cases, not as dire as it seems.

If you plan to stay in your home long term, negative equity is often a temporary issue. Toronto’s real estate market has historically rebounded. Time, paired with disciplined financial management, can often correct the imbalance without drastic action.

The greater concern arises for those facing a mortgage renewal. Renewing into today’s higher interest rates with a lower equity position can reduce your financing options and push monthly payments higher. However, working with a mortgage broker who understands both A-lender and alternative lending strategies can help you navigate this with more flexibility. Switching to a variable rate or extending the amortization period may provide some much-needed relief.

Strategic Refinancing Can Help

Even in a negative equity position, refinancing might still be possible, especially for homeowners dealing with high-interest debt. Bundling multiple obligations into one mortgage can lower monthly payments and simplify your financial life.

That said, refinancing requires a thoughtful approach. You will want to weigh your current home value, loan-to-value ratio, income stability, and long-term goals. A well-structured refinance can create breathing room without putting your future at risk.

We cover refinancing strategies in greater depth in our article on what a second mortgage is and when to consider one.

Investors Need to Watch the Numbers

Real estate investors in Toronto are feeling the pressure too. Rising property taxes, stagnant rental income, and tougher lending criteria are reducing profitability. For those with highly leveraged properties, a prolonged period of negative cash flow may not be sustainable.

In these situations, it may be worth re-evaluating your portfolio. Selling a secondary asset, even at a modest loss, might free up capital and reduce your risk exposure. The key is to align each decision with your long-term wealth strategy, not just short-term market movements.

What to Do Next if You’re Underwater

If you're dealing with a Toronto negative equity mortgage, do not rush into a decision. Start by speaking with a mortgage advisor who understands the nuances of this market. Every scenario is unique, and the right solution depends on your specific financial picture.

You may not need to sell. You may not need to refinance. But you do need a plan that balances stability, cash flow, and long-term opportunity.

Let’s Make a Plan

At Seventy Seven Park, we help clients across Ontario develop smart real estate and mortgage strategies, especially in challenging markets. If you're feeling uncertain about your renewal, your equity position, or your next financial move, our team is here to guide you with clarity and confidence.

We do not just manage transactions. We help you build long-term value.

Click Here To Get started today.