Early Mortgage Renewal

According to CMHC (Canada Mortgage and Housing Corporation), "A large majority of Canadians who refinanced their mortgage in the last year, did so before the scheduled renewal time."  In fact, according to a recent CMHC survey, a whopping 71% of all borrowers refinanced before their mortgage term was up between their 3^rd and 4^th year term.

This shouldn't come as a surprise to most mortgage professionals.  In my office we send out a letter to clients on their third anniversary anticipating they may want to do something.  According to CMHC's survey, renovations are the number one reason Canadians refinance.  Reinvesting the funds back into your home through home renovations is money well spent.  A close second is debt consolidation.  Almost one-in-three of those refinancing used the funds to consolidate debt.  Around the third anniversary is also a time when Canadians may have decieded to move.  The point is, this is a critical point in the life of your mortgage and you should prepare for it at the beginning of your mortgage.

Regardless of the reason for your refinance, if the opportunity comes up mid term you need to be in a mortagage that will allow you to make the change as painless as possible.  An open mortage would be the most flexible to accomodate your needs at this juncture but for practical reasons (interest rates on open mortages are inordinately high), you need need to consider less expensive measures.  First of all, will your lender allow you to break your mortgage?  If you are moving, will your lender allow you to port your mortgage?  This will avoid any penalty.  If you are refinancing, can you increase the amount of your mortgage and blend your existing rate with the current market rate and avoid the penalty?  Lenders' policy on this subject can vary. 

Given the high percentage of likelihood (71%) you could fall into this scenario, it behooves you to address the subject of early renewal at the outset of your mortgage.  There is nothing worse than finding out you can't break your mortage unless you have sold your property - the one exception. 

Think ahead!