You should review your mortgage on a regular
basis and keep up with new products and offers that are available
- they may save you a bundle. When you break your mortgage
contract to renew your mortgage at a new rate and a new term,
you are faced with a prepayment charge to reimburse your financial
institution for the lost interest income. Typically, this
prepayment charge is based on the greater amount of either
3 months interest or the interest rate differential (IRD).
If your mortgage was insured by Canada Mortgage and Housing
Corporation (C.M.H.C.), a maximum penalty of three months
interest can be charged only, after the third anniversary
of the interest adjustment period or after the third anniversary
date from your last renewal.
Whether or not you should early-renew your
mortgage depends on several factors. If the current rates
are lower than the rate you have, compare the prepayment charge
against the savings by having the lower rate, and this will
point the way. Or, if you believe that interest rates will
be higher at your existing renewal date, you can renew early
to protect yourself from higher rates.
One thing to remember if you decide to early
renew, the prepayment charge will have to be paid up front.
If there is room, you can add it to your mortgage, but you
will have to go through a lawyer to redo the mortgage, and
this cost will have to be taken into consideration when deciding
which way to go. Some financial institutions will blend both
rates for the new term.
Remember that we have the CASH-BACK programs
that could pay for your prepayment charge. The savings in
some situations run into the thousands of dollars.
Re-examine your mortgage from time to time,
and at least once a year. There are thousands of dollars that
could be saved in many situations, but they go unnoticed.
Mark our site,
as one of your favourites for quick
reference, and you can always contact us by e-mail or phone
and obtain a FREE mortgage check-up from one of our mortgage
specialists at homefund.com