By A.J. Keilty, President, KEILTY Realty Management
No. A higher mortgage payment is not a ground for raising rent above Ontario's annual guideline, and the guideline is small next to a renewal increase.
On a Belleville house renting at $1,950 a month, the 2027 guideline of 1.9 per cent is worth $37.05 a month. A renewal that lifts the payment by 15 per cent, the Canada-wide average the Bank of Canada put on the last of the pandemic-era five-year, fixed-payment mortgages, is worth about $246 a month. The lawful increase covers about one dollar in seven.
That is the arithmetic every owner facing a renewal needs. For a unit the guideline covers, the rent side is capped by law, and nothing about a renewal lifts that cap. The money has to come from somewhere else, and the useful question is which lever to pull first.
The short version.
For a unit the guideline covers, it lets you take the guideline unless you can bring yourself inside one of three narrow grounds that have nothing to do with debt. There is also an agreement route, where a tenant agrees to an increase above the guideline, but the Act confines it to a capital expenditure or an added service or facility. A renewal is neither.
Ontario sets a rent increase guideline every year. The province's own page on residential rent increases puts the 2027 figure at 1.9 per cent, which governs increases taking effect in 2027, and says that increases above the guideline need an order from the Landlord and Tenant Board. The 2026 figure is 2.1 per cent, and a notice served now lands in 2027.
The same page sets out the two timing rules. It says that "in most cases, the rent for a residential unit can be increased if at least 12 months have passed since the ..." last increase or the start of the tenancy, and that "the landlord must give a tenant written notice of a rent increase in the proper form at least 90 days before it takes effect." We read the page on 2026-10-27, when it was stamped Updated 2026-06-23.
Section 116 (1) of the Residential Tenancies Act, 2006 is the notice provision, and it requires "... at least 90 days written notice of the landlord's intention to do so." Section 116 (3) adds that the notice "shall be in a form approved by the Board and shall set out the landlord's intention to increase the rent and the amount of the new rent." Lateness is not the only way to get this wrong.
Section 116 (4) then provides, in full, that "An increase in rent is void if the landlord has not given the notice required by this section, and the landlord must give a new notice before the landlord can take the increase." It voids for want of the notice required by the whole section, the form included, not only the 90 days.
That closing limb is the cure for a notice you find out later was defective, and it is the whole of the cure. The void increase does not revive, and a new notice carries its own 90 days under subsection (1). There is one narrow exception to the notice requirement, at section 117 (1), which turns on an order made under paragraph 6 of subsection 30 (1) and is unlikely to be your situation.
So a renewal landing in March does not produce a rent change that month. Serve the notice the day the renewal letter arrives and the increase still cannot take effect for at least another 90 days. It is separately barred until twelve months have passed since the last increase or the start of the tenancy. Those are two different dates, and the later of the two governs.
Large enough that it is worth writing down rather than estimating.
In its Financial Stability Report published 2026-05-28, the Bank of Canada said that the last of the five-year, fixed-payment mortgages taken out during the pandemic would renew in the twelve months after that report.
It put that group at "about 12% of all outstanding mortgages in Canada" and said that "on average, these borrowers will see their payments increase by about 15%, broadly in line with increases similar borrowers have faced over the past 12 months." The Bank also said the wave would end, and that "by the second half of 2027, nearly all mortgage holders facing large payment increases will have renewed."
Those are Canadian figures for all mortgages, not Ontario figures for rentals. Your own renewal letter is the only number that governs your property.
Put the two together on a single unit. Take a three-bedroom house in Belleville renting at $1,950 a month, with a mortgage payment of $1,640 going into renewal. Treat the house as an example rather than a market figure.
Run the same arithmetic on your own unit before anything else. The rent is the biggest number on the page, which is why it is the first one an owner reaches for. On these figures it is also the one that moves least.
No, and the four places you would look all say the same thing.
The Board's Interpretation Guideline 14 says a landlord "may make an AGI application in any of the following situations" and then gives three: an extraordinary increase in the cost of municipal taxes and charges "for the residential complex or the building containing the rental units", eligible capital expenses, and operating costs related to security services.
The instructions to the L5 application, stamped November 2025, list the same three in Section A. We read both on 2026-10-27. Neither list of grounds contains financing, interest or a mortgage, and in both documents the list is closed at three.
The third place is the definition that sits underneath the capital expenditure ground. O. Reg. 516/06, s. 18 (1) defines "capital expenditure" as "an expenditure for an extraordinary or significant renovation, repair, replacement or new addition, the expected benefit of which extends for at least five years including ...", and the definition goes on to exclude routine or ordinary work and work that is substantially cosmetic. A mortgage payment is not a renovation, a repair, a replacement or a new addition.
The fourth is section 126 (7) of the Act. It opens "Subject to subsections (8) and (9) and except under the prescribed circumstances" and then lists six purposes, at least one of which an eligible capital expenditure has to serve. The first is that "it is necessary to protect or restore the physical integrity of the residential complex or part of it". Financing is not among the six.
One place a mortgage rate does appear is the arithmetic. Guideline 14 says that "net present value is determined using the interest rate fixed by s. 20 of O. Reg. 516/06", a rate set by reference to the chartered bank administered conventional five-year mortgage interest rate.
That is a discount rate applied to work you have already done. It is not a ground of its own, and it does nothing for an owner who did no work.
If you did real capital work in the same period, that is a separate question with a real answer, and it has its own rules about timing, receipts and the size of the order. We set those out in how to apply for an above guideline rent increase in Ontario. The point for a renewal year is narrower: the work has to have been done, and the renewal itself buys you nothing.
It changes everything, and it is the first thing to check rather than the last. Establishing an exemption is a documentary exercise that costs you nothing. An above-guideline application is a filing, an evidence file and a hearing. If the cheaper route is open to you, there is no reason to walk the expensive one.
The province's page lists what the guideline does not apply to: "new buildings, additions to existing buildings and most new basement apartments" first occupied for residential purposes after 2018-11-15, rental units on turnover of a tenancy, community housing units, long-term care homes, and commercial properties.
Those five sit outside the guideline for different reasons, so treat them separately. A unit exempt because it was first occupied after 2018-11-15 is still covered by the Act: the notice rules and the 12-month rule still apply, and what goes is the ceiling on the amount. Turnover is a reset rather than an exemption, with no notice and no 12-month wait because there is no existing rent to increase. Commercial property is outside the Act altogether.
That matters here. An owner who bought recently is the one a sharp renewal catches hardest, and a unit first occupied after 2018-11-15 is by definition a recent one. Establishing the date is documentary work rather than an assumption, and getting it wrong in either direction is expensive.
The rent resets, and in a renewal year that fact tempts owners into an expensive mistake.
On a unit the guideline covers, turnover is where an Ontario rent moves to whatever the market will carry. It is also where you stop collecting rent, pay for the turn, and take the utilities back.
Our figures on that are set out in how much a vacant rental unit costs per day in Ontario, and the short form is that a $1,950 house is losing about $64 a day in rent alone while it sits, before the turnover bill and before any utilities that revert to you.
Six weeks empty is roughly $2,700 of rent you will never bill, plus the turnover work. That is more than the entire annual gap the renewal created. Chasing a reset to solve a financing problem can cost more than the problem.
Nothing here is a reason to lean on a sitting tenant to go. That route is prohibited, the risk sits entirely with the owner, and it does not solve a financing problem. A tenancy that ends because the tenant chose to end it is the only version of this that helps you.
From four places, and they are worth ranking by how much they move.
Days of vacancy. This is the largest controllable number on a small portfolio. At about $64 a day on the example house, cutting a six-week vacancy to three weeks is worth roughly $1,350, which is more than half the annual gap. Marketing before the unit is empty, showing it often, and screening quickly are what produce that, and none of them require the tenant to pay more.
Turnover cost and tenant retention. A tenancy that renews costs a fraction of what a tenancy that ends costs. A tenancy that ends costs paint, cleaning, repairs, a lock change and the vacant days around them. In a year when the payment has already moved, a tenant who stays is worth money in a way that is easy to overlook, because the saving never appears as a line item.
Arrears speed. The cost of late rent is a function of how fast the file moves, not of how the tenancy ends. An owner who serves nothing for two months has turned a cash problem into a bigger one.
The expenses you control. Insurance is re-quoted annually and is worth re-quoting. Utility responsibility is set in the tenancy agreement and can be looked at on a new one. Planned capital work, where it is genuinely capital work, can carry an AGI claim if the timing and the receipts are right.
There is a fifth lever and it is not ours to advise on. The payment itself is a conversation with your lender or mortgage broker, about the term, the amortization and whether a switch at renewal is open to you. We manage property. We are not mortgage brokers or financial advisers, and that side belongs with someone who is.
It helps where the gap is being driven by time, and it makes things worse where the gap is being driven by the payment itself.
The case against is one we have put in writing before. If your rent only just covers the mortgage, the taxes and the insurance, adding a management fee can turn a small positive month into a negative one. A renewal that has already moved the payment makes that more likely, not less. A manager does not change the payment, and on a single unit with no margin the fee is one more fixed cost.
The case for is narrower and it is about speed. The levers above are all operational: days on market, response time, showing availability, screening turnaround, and getting a notice served the week it should be served rather than the month after. Those are the things an owner with a day job gives away first.
KEILTY Realty Management charges a flat monthly management rate per unit rather than a percentage of rent, so the management fee does not climb when the rent does. The full schedule for houses, including what leasing and renewals cost, is on our single-family rental page.
Put a number on the time rather than on the feeling. If your last turn took six weeks and a managed turn would take three, that difference is worth about $1,350 on the example house. Compare it with the fee. If it does not clear, self-managing is the right answer and we will say so.
Can I raise the rent above the guideline because my mortgage payment went up? No. Interpretation Guideline 14 and the L5 instructions both list three grounds: an extraordinary increase in municipal taxes and charges, eligible capital expenses, and operating costs for security services. Financing is not one of them, and O. Reg. 516/06, s. 18 (1) confines a capital expenditure to an extraordinary or significant renovation, repair, replacement or new addition whose expected benefit runs at least five years.
How much can I raise the rent in 2027? The 2027 guideline is 1.9 per cent for units the guideline applies to. On a rent of $1,950 that is $37.05 a month. In the ordinary case you need at least 90 days' written notice in the Board's form, and at least 12 months since the last increase or the start of the tenancy.
Does the guideline apply to my unit at all? Not if it is a new building, an addition to an existing building or, in the province's words, one of "most new basement apartments" first occupied for residential purposes after 2018-11-15, and not on turnover to a new tenant. The province also lists community housing, long-term care homes and commercial properties as outside it. The notice and 12-month rules still apply to an exempt unit; only the ceiling on the amount goes.
If your rental is coming up for renewal and you want to know what the property can actually carry, we will tell you plainly what we would do with it. Tell us about the property and A.J. Keilty will call you within 20 minutes in business hours.
This post is general information about Ontario residential tenancy law as of 2026-10-27, not legal advice, and it is not mortgage or financial advice. Legislation, regulations and tribunal practice change. For advice on a specific property or situation, speak with a lawyer or licensed paralegal.
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