Lock into a lower rate before your term is up!

Renegotiating your mortgage before the term is up



Expert Contributor: Jennifer Coy |


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

the lender.


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



No comments

Post Your Comment:

Your email will not be published
Reciprocity Logo The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Greater Vancouver REALTORS® (GVR), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the GVR, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the GVR, the FVREB or the CADREB.