The Pros & Cons of Early Mortgage Renewals

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When your mortgage term is about to expire, it’s best to start considering renewing your mortgage. But you may be wondering when the best time to renew is – sooner or later? There are always two sides to every coin; there are benefits and consequences to every choice. To help you make an informed decision, learn about the pros and cons of early mortgage renewals:

PROS

Gives the homeowner an opportunity to consider options and more time to make a decision.
Early renewal features typically let you lock in a new rate 2-4 months in advance before your mortgage’s expiry. Some lenders may even let you renew up to 6 months in advance.
Minimize the risk of future increased rates.
Provides an opportunity to negotiate a lower rate for your next term.

CONS

Early mortgage renewals require you to pay a premium in order to enter a new term with a more desirable rate.
If you renew your mortgage too early, you may lose an opportunity for a lower rate before your term ends.

Keep in Mind…

The benefit of renewing early depends on the rate you are offered.
By law, banks have to send you a renewal notice at least 21 days before the end of your existing term, but in most cases, they will contact you well in advance.
Negotiate with your lender. Your lender’s first offer may seldom be the best offer. According to the Canadian Association of Accredited Mortgage Professionals, almost four out of 10 people who renew with the same lender do so at the original rate proposed by that lender.
If you don’t have time to do the research and don’t like negotiating, a mortgage broker can help you obtain a new mortgage rate. Homeowners who use a broker at renewal time usually pay less than those who don’t.