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

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

needs.