Renegotiating your mortgage before the term is up
Expert Contributor: Jennifer Coy | goldengirlfinance.ca
Let's say you have a mortgage with a 5-year term, but you're only 3 years into the term. Do you have to wait until the
full 5 years is up before renegotiating (especially given an appealing lower interest rate environment)?
Mortgage expert, Jennifer Coy, provides the following advice:
There are three different categories of mortgages where pre-payment is concerned:
1) Open mortgages refer to those mortgages open to full pre-payment at any time, without penalty.
Closed mortgages can be broken down into two very distinct categories:
2) Mortgages that are closed to pre-payment entirely.
3) Mortgages that are open to pre-payment within certain guidelines.
Most mortgages in the open market are the latter. So, in most cases, you can pre-pay a certain amount without
penalty. Outside of these terms, you would be responsible for paying a penalty, representing some loss of interest to
In the specific case of a 5-year mortgage at a higher interest rate than is currently available, you may benefit from
switching to a mortgage with a lower interest rate, despite the penalty you will pay to break the term early.
The best thing you can do is to read your original mortgage agreement, as pre-payment guidelines must be provided
in writing. If the guidelines are unclear, or you need a hand in calculating what your costs might be, don't be afraid to
ask a mortgage professional. Ultimately, you want to search out the mortgage that is best suited to your current