Ask an Expert: How to Renew Your Mortgage the Smart Way

At Avi Urban, we work with some great experts to help you get the details on the ins and outs of owning a new home. We recently checked in with Laura Parsons, Bank of Montreal Manger of Mortgage Specialists and Calgary Sun Columnist, to get the info on early mortgage renewal.

With so much talk about mortgage interest rate changes, its led to people asking me whether or not they should renew their mortgages early. It’s good to do some homeowner on this topic before you decide.

With an early renewal, it usually means you will be breaking the terms of your current mortgage to enter into a new term, often times at a more desirable rate.

Ask a specialist: Your mortgage specialist can provide you with historical rates, which you can compare to current rates. Check out recent economic reports, blogs, and forecasts for insight into which way interest rates are likely to move. You can event ask your bank to provide you with some of their recent economic reports.

Talk about it: If you have a joint mortgage, it’s always important to have an honest discussion with your partner to review your budget and determine what you can comfortably afford. Look at your future expenditures to better understand your budget.

Ask about penalties: It’s also important you find out if there are any pre-payment penalties if you renew your mortgage early, and how much those penalties would be. Some questions to ask include – Does it make sense to pay the penalty to obtain the new lower rate? How long will it take you to recover? What are your monthly costs in both situations, early renewal or not?

There are many factors to consider and you’ll want to make a well-informed decision. Remember to consider everything because, whatever you decide, you don’t want to second-guess your decision. Whether or not rates go up, you have to balance peace of mind against the rate increases that might strain your budget.

A mortgage specialist would be happy to review your current mortgage with you and help you understand your options.

Laura Parsons is an area manager of mortgage specialists at BMO Bank of Montreal. If you have a question about home financing, reach her at laura.parsons@bmo.ca