The problem with early mortgage renewals

Renewing your mortgage

Is your mortgage renewing this year?

If so, many lenders are contacting their mortgage clients well in advance of the renewal date to offer an early renewal. No doubt you will be facing a much higher interest rate, so an early renewal offer might be tempting for many homeowners to consider.

You may have concerns that interest rates may be higher if you wait until your renewal date. However, renewing your mortgage early can actually be a costly decision, and it's important to understand why this is the case before making any decisions.

One reason why renewing your mortgage early is not a good idea is that the new higher rate will be effective immediately. Your bank will not hold today’s rates for you until the end of your current mortgage term. If you have a lower rate and are now renewing into a higher rate, you will lose the benefit of the lower rate from now until the actual renewal date because the higher early renewal rate will be set right away.

That will immediately increase your interest costs and you may also be facing a higher mortgage payment immediately.

Another reason why renewing your mortgage early is not a good idea is it can be risky. Interest rates are constantly fluctuating, and if you renew your mortgage early and rates go down, you could end up paying more for your mortgage in the long run.

So, what can you do without renewing your mortgage early? As a mortgage broker, I can provide a rate hold, which allows you to lock in a rate, typically up to 120 days. That means that even if rates go up, you'll still be able to take advantage of the low rate you locked in.

That then allows you to keep an eye on the market and make an informed decision about when to renew your mortgage, without the risk of rates going up while keeping the benefit of your current lower interest rate to the end of your current term.

As your mortgage broker, I can shop around for the best rates and help you understand the various terms and conditions of different mortgages, so you can make an informed decision to ensure you are in the best mortgage product for both your short-term and long-term goals.

Renewing your mortgage early can be a costly and risky decision. Instead, consider working with a mortgage broker to take advantage of the best mortgage rates without renewing your mortgage early.

If you would like to discuss possible options for your upcoming mortgage renewal this year, please book a time here on my calendar for a quick chat.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. For over two decades, she has been helping clients to arrange their financing to purchase a home, refinance, or renew their mortgages. Drawing from her extensive experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution, and as a Mortgage Broker, April has the necessary expertise to design a tailored mortgage plan with features and options that cater to each client's individual needs. April offers a complete range of residential and commercial mortgage financing services to clients throughout British Columbia and the rest of Canada through her affiliation with the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 1-888-561-2679.

Website: www.reddoormortgage.com

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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