Bank offering early mortgage renewal? Be sure to read the fine print

A residential neighborhood in Toronto, Ont. Photo by Laura Proctor/Bloomberg files

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Some mortgage lenders are positioning the Iran war shock as justification for locking in — which may or may not be good advice. I’m hearing from readers that a few banks are even calling them six months before renewal to pitch this idea.

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Sometimes the rates on these early renewals are quite fair and insulate the borrower from future risk. Other times, the bank is just reaching for your wallet with both hands and a friendly smile.

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One way to know how good your renewal quote is, assuming you’re a well-qualified borrower, is to compare it on the best mortgage rates page linked to this story.

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Related tip: If you’re renewing a default-insured mortgage from Canada Mortgage Housing Corp., Sagen or Canada Guaranty and haven’t refinanced it yet, zero in on the “Lowest insured mortgage rates.” Insured rates are the least expensive you can get, and your insurance will carry over to any mainstream lender.

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At the moment, you can find insured fixed rates from Citadel (nationwide), Butler Mortgage (Alberta, B.C., Ontario) and Ratebuzz (Ontario) in the 3.50 to 3.60 per cent range.

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I don’t know how long these deals will stick around, but I wouldn’t wager my lunch money on it being long — not with bond yields on the up escalator.

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Alternatively, if it’s a leading uninsured fixed rate you need, they’ll set you back another 35 to 45 basis points at the moment.

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And by the way, if you’re looking for rates that are still dropping, look no further than short-term posted rates at big banks like Bank of Montreal and TD. Despite bond yields going moon-bound, these lenders have been chopping posted rates.

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Why would they possibly do that?

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Three words: Prepayment penalty calculations.

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“It is ridiculous that banks are able to create ‘comparison rates’ that are far below market rates, which in turn creates Interest Rate Differential penalties that are far greater than they should be,” says penalty expert Matt Imhoff at Penalty Mentor.

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It’s just another reminder to look under the hood of your mortgage contract before signing it. The lowest rates sometimes have big headaches in the fine print.

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For the best national insured and uninsured mortgage rates, updated daily, please visit our mortgage rate page here.

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