When your lender offers you the option of an early renewal on your mortgage, there’s a lot to consider. In Part 1 you saw the importance of shopping around and factoring in hidden costs; here are some more things to watch out for.
Be Wary of Rising Rates…
Interest rates on mortgages can rise quickly, especially given their current lows. If you’re being offered a low, fixed rate as an early renewal option, it may be a good idea to lock in while you have the chance. It’s all but certain mortgage rates will be higher in a few years’ time, so a good renewal offer is something to take advantage of.
…But Not Too Wary
While it is important to keep in mind that interest rates could rise at any time, it’s also important to remember that rapid mortgage rate spikes are not very common. In today’s market, the chances that inflation will cause a rapid spike in mortgage rates are lower than ever. Some lenders offer to lock in mortgage rates slightly higher than current market rates as insurance against future rate hikes, but for current borrowers this insurance is largely unnecessary.
Don’t Let Your Lender Pressure You
A lender may try to pressure you into making a decision by telling you that their early renewal rate offer will expire. In reality, most lenders will honor these rates as long as rates in general have not increased, so you can feel comfortable shopping around before giving your lender an answer.
Decide With Confidence
If you do your research and make sure to fully examine all the options out there, you can rest assured that you’re getting a great deal on your mortgage. A mortgage broker can give you confidence that you’re getting the best deal available.