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What You Need to Know About Mortgage Renegotiation

mortgage renegotiationIn the past, it was common for mortgage lenders to charge a three months’ interest penalty to their borrowers. Now the interest rates throughout the nation are dropping. Canadian lenders are often using an Interest Rate Differential penalty. This is the larger of the two options and will give the lender the opportunity to profit. As interest rates continue to fall, it only helps the lenders charge a larger penalty to their borrowers. This is because the difference between your current rate and the market rate will grow and this will cause your penalty to grow as well.

Tips on How You Might Be Able to Lower Your Penalty Charges

If you start to calculate your penalty charges based on how the penalty will be charged by your lender, you might find that mortgage renegotiation is just not an option. This is because you’ll be required to pay thousands of dollars in fees. The easiest way to calculate your penalties is to call the lender or use tools online. You can find a very valuable mortgage penalty calculator at www.ratesupermarket.ca/mortgage/penalty_calculator to estimate how much it will cost.

Once you have a rough idea, you’ll need to consider some of the ways that you can lower the penalties if needed. One way to reduce the penalty charges is to make a lump sum payment of the fees before renegotiating the terms of your mortgage. If you have the money, you may also be able to pay down the balance on the loan to lower how much you will be penalized. These options are not always practical for people who are looking to lower their mortgage rates.

If paying down your balance is not realistic, you might want to consider the blend and extend option. This option allows you to take advantage of the lower market rates while extending the length of your mortgage term. Talk to your broker about this option when doing your mortgage renegotiation.

Renegotiating your mortgage could potentially lower your payments and the interest you are paying to your lender over the life of your loan. Make sure you educate yourself on the process, know the penalties, and decide if renegotiation is right for you.

What’s your experience been with the mortgage renegotiation process? Leave your comment in the box below.