Early Mortgage Renewal: Are You Truly Saving Money?

Here’s the scenario: your mortgage term is coming due in a few months and now you’re starting to take a look at the rates that are available out there. Since it’s nearly 2014, things have moved over the course of the past year, but not by much. And as always, questions remain: Do you renew with your current lender? Do you go for another fixed rate term or do you choose to roll the dice and choose a variable rate mortgage?

But what about renewing your mortgage EARLY? Many banks are offering the opportunity to renew your mortgage early by a month, two months or even more. The idea behind early renewal is to lock into the lowest available rates right now to secure yourself against a market that may be increasing. But some professionals in the mortgage industry say that an early renewal doesn’t necessarily mean you’ll save money.

Calum Ross, Owner and Principal at Calum Ross Mortgage, weighs in on the question in this Globe and Mail article:

“Unless the consumer believes that interest rates are going to move up significantly prior to their ability to lock in, I fail to see a reason to do an early renewal with their existing lender.”

The Globe article goes on to say that by locking in earlier, you minimize risk of adverse rate movements. But in return, you pay a premium to the best available rates, and you’ll lose all benefit if rates drop before your term is up.

So decide for yourself: Does renewing your mortgage early make sense for your situation? Or would it be prudent to wait for your mortgage to come to term and assess the available rates at that point?

Leave us a comment and let us know what you would do!

Read the full Globe and Mail article here.