No. If you switch from one lender to another at your renewal date there will not be any penalties whatsoever. However, if you switch before your maturity or renewal date there may be a penalty. If you have an open mortgage there probably will not be any charge. If you have a closed mortgage, you will most likely have a charge. It is important to consult with a mortgage broker, so that you can determine whether or not a ‘break and run’ strategy will work for you.
No. Then lender is not under any obligation to renew your mortgage. It does not ‘automatically’ renew. In fact if you have ‘missed’ or been late with any payments the lender could use this as an excuse not to renew with you. A loss of a job or a divorce may be another reason. But, in truth, no excuse is necessary for the lender to call in your loan on renewal.
Mortgage life insurance is not mandatory however, it is highly recommend.
Yes! A good rule of thumb is whenever making a change will result in a 1% interest rate saving. This is so popular that it is even has a name – the ‘break and run’ strategy in the Canadian lending industry. The improved rate change will absorb any prepayment penalty.
The single biggest dilemma for Canadian mortgage borrowers has been whether or not to lock in to a long-term mortgage or short-term. History has shown that, overall, it has been financially beneficial to go short-term or variable.
Most variable mortgages give you the right to change to a fixed rate at any time. If you think the interest rise is not just a short-term fluctuation but will be a long-term trend you have the option of converting your mortgage into a fixed term.
The interest rate charged is a fixed amount and does not change during the term of your mortgage.
Whenever you need a Canadian mortgage loan that is greater than 80% LTV (loan to value) it is considered a high ratio or insured mortgage. If you are a first time home buyer then you can borrow up to 95% LTV and only need to come up with a 5% minimum down payment. The Canada Mortgage and Housing Corporation (CMHC) insures the lender in case you default on our loan. You must pay for this insurance premium, up front or you can add it to the mortgage.
A variable rate mortgage is a mortgage that fluctuates up and down with the prime-lending rate.