Gord McCallum of First Foundation Mortgages forwarded me an article from the Globe and Mail last week that talked about the pro's and con's of renegotiating your mortgage.
Why would you consider renogiating? Well, mortgage rates have come down significantly, and if your current rate is over 5% there is the potential to save a fair bit of money.
Many people shy away from renegotiating because they don't want to face any penalties, which, according to the article in the Globe and Mail, are on the rise. But often the math works out and paying the penalty is worth it.
Gord McCallum wrote to me: "with the economic slowdown a lot of people are trying to save money…on staples like groceries, heating bills, car maintenance, and other things. While saving money on everyday items is a worthy goal, a lot of people ignore the biggest and potentially most substantial place they can save money – their mortgage. My advice to people would be not to let the fear of a penalty get in your way, because even with a penalty you will likely save a lot of money at today's rates."
Another option is to blend and extend your mortgage, which often means you won't pay a penalty at all (although the savings won't be as high). Personally, I think the blend and extend option could be a great way to go; mortgage rates will increase again once the economy picks up, and if your term ends once rates are on the rise you could face an payment increase. By blending and extending you can lengthen the time you benefit from the lower rate.
All in all, it couldn't hurt to give your mortgage broker a call and find out exactly what your options are - it could end up saving you a lot of money!
