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Renewing or Renegotiating Mortgage Interest Rates

Interest rates have been falling and you may benefit from breaking your mortgage and transferring the mortgage to another institution. Some agreements do not allow for a mortgage to be renegotiated, but most do. Financial institutions will usually allow you to pre-pay your mortgage in full, but will add a penalty. Many people shy away from renegotiating because they don't want to face any penalties But often the math works out and paying the penalty is worth it.

Your penalty charges depend on what was stated in the original mortgage agreement or in the most recent renewal agreement that you signed.

If your agreement allows you to pay off or renegotiate your mortgage early, you will normally have to pay a penalty. The penalty is generally the greater of three month's interest on your current mortgage, or the interest rate differential which can be calculated as follows.

The new bank or institution will generally cover the cost of appraisal and legal fees. They will not cover the cost of pre-payment penalties and the discharge fee but some bsnks will allow the borrower to include penalties in the new mortgage.

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).

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