19 Dec

Worth paying a premium for rate?

General

Posted by: Rabinder Dhillon

Many mortgage lenders want you to believe that rate certainty is worth paying a premium for. It is the justification, they say, for staying with them and renewing your mortgage early.

Early renewal features typically let you lock in a new rate two to four months ahead of when your mortgage is due to mature. Some lenders, like Scotiabank, even let you renew up to six months in advance.

The question is, do early renewals save or cost homeowners money?

“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,” says mortgage broker Calum Ross 

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. 

Click here for the full Globe and Mail article