Navigating Mortgage Renewals: Understanding Your Options

James Mckeown
Dec 4, 2023
2 min read

Author: James McKeown

www.mortgagehfx.ca

If you're thinking about your mortgage renewal, it's important to understand your options and what they could mean for your finances. Let's break down the basics and debunk some common myths.

What is Mortgage Renewal?

There are different ways you can renew your mortgage:

Regular Renewal: This happens at the end of your mortgage term. You can usually renew without a penalty, but watch out if you're thinking of switching lenders; some might automatically renew you with terms that could have penalties.
Early Renewal with the Same Lender: Many lenders offer a chance to renew up to 6 months early without penalty, but only if you stay with them. This can be appealing, especially if the new rate is lower.
Early Renewal with a Different Lender: This is what we're focusing on today. Sometimes, it makes sense to switch lenders early, especially if rates are going up or you need to adjust your mortgage for reasons like taking out equity or a divorce.

Understanding the Costs and Benefits

I do the legwork to figure out if there's a penalty for leaving your lender and if the savings from a new rate are worth it. With rates rising, as we've seen a nearly full percentage point increase from last year, this becomes more important.

For example, a $300,000 mortgage that had a rate of 1.59% last January would cost you about $14,000 less over five years compared to today's rate of 2.54%.

Debunking Common Myths

"My bank will give me the best rate": Sometimes, but not always. It's worth checking out other options too.
"All mortgages can be broken early": Not true. Some mortgages can't be broken early without a hefty penalty.
"My penalty will decrease as I get closer to renewal": Actually, penalties can increase as your term ends.
"I calculate my penalty using my mortgage rate": Banks often use a different rate for penalty calculations, which can be higher.

Making the Right Choice

As a broker, I help you understand these options and costs. If it's better to stay with your current lender, I'll tell you. But sometimes, switching early can save you money, especially with rates expected to rise.

About the Author

I'm James Mckeown, a licensed mortgage professional with 16 years of experience in Ontario and Nova Scotia. From working in banks and credit unions to various roles in the industry, I bring a wealth of knowledge to help you make the best mortgage decisions.

Need Expert Mortgage Advice?

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