Are you considering an early mortgage renewal for your Toronto home? There are many things to consider when choosing this option. We’ll explain some things you need to know to help you make the best choice.

1. You may have to pay a penalty for renewing early

If you want to renew your mortgage early, you may have to pay a prepayment penalty. If you have an open mortgage, where extra payments are allowed, you may not have to pay a prepayment penalty. If you have a closed mortgage that doesn’t allow additional payments, you will have to pay this fee.

One way to avoid paying this penalty is to renew your mortgage only a bit before the end of your mortgage term. With a closed mortgage, you may renew your mortgage up to 120 days early without having to deal with a prepayment penalty.

2. You may also have to pay other fees associated with renewing your mortgage early

Beyond a prepayment penalty, you may have to pay other fees associated with renewing your mortgage early. These fees vary from lender to lender but may include administration and mortgage discharge fees.

If you want to stay with the same lender when you renew your mortgage, they may be willing to lower or waive some of these fees–it never hurts to ask!

3. The difference in mortgage rates is the main thing to consider

The most important thing to consider when renewing the mortgage on your Toronto home early on is what difference you’ll be looking at regarding interest rates. These are two example scenarios: one where renewing early may not make sense and one where it does.

  • Scenario 1: You have a five-year fixed-rate mortgage that you got when rates were low: 2 percent. You have one more year before the term expires, and you are worried rates will keep rising. You’re allowed to pre-pay as much as you like with no penalty. In this situation, it’s likely better to not renew early.

  • Scenario 2: You have a variable-rate mortgage at a low rate, but it keeps rising as the Bank of Canada has raised rates. You are constantly worried about whether rates will keep going up and whether you can afford your mortgage if they do. You have the opportunity to get a fixed-rate mortgage that’s lower than your current rate. In this situation, renewing early may save you money in the long run.

We Can Help You Determine the Right Choice

It is a big decision—and you shouldn’t have to make it alone. We can help you determine your options for mortgage renewal in Toronto and whether or not an early mortgage renewal can help you save money.

To learn more about how we can help you when you’re ready to renew your mortgage, call us at 888-257-8130 or contact us online.