Personal Finance

Can you negotiate mortgage rate a year into a four year term?

  • Last Updated:
  • Feb 9th, 2021 6:33 pm
[OP]
Deal Addict
Apr 7, 2011
2002 posts
496 upvotes
Hamilton

Can you negotiate mortgage rate a year into a four year term?

I signed a four year closed fixed rate mortgage last December. Since then rates have dropped by around a full point. Yes I know what I signed, but it can't hurt to ask.

Is there any opportunity to call up the bank and look for a discount? Any best practice to do so? I've never had enough of a rate difference to really benefit in the past but I figure this would move the needle a bit.
6 replies
Deal Expert
User avatar
Jan 27, 2004
48627 posts
12034 upvotes
T.O. Lotto Captain
Rules are pretty much written in stone.
Fix rate have hefty penalty for breaking.

See your bank and find out what the penalty is for breaking.

If money saved from new rate+term is greater then the penalty, then go for it. But being only 1 yr in... i don’t think so. Unless your mtg has very favourable terms.
Deal Addict
Nov 23, 2003
2158 posts
632 upvotes
Sure if you have $20000 + in cash for penalty then go ahead otherwise don’t sign fix next time. Variable is the way to go.
Jr. Member
User avatar
Aug 14, 2020
180 posts
168 upvotes
Sum_guy wrote: I signed a four year closed fixed rate mortgage last December. Since then rates have dropped by around a full point. Yes I know what I signed, but it can't hurt to ask.

Is there any opportunity to call up the bank and look for a discount? Any best practice to do so? I've never had enough of a rate difference to really benefit in the past but I figure this would move the needle a bit.
The lender has no motivation to do anything except perhaps a blend and extend. Switching lenders and paying the break fee is the question. Is the savings worth the break fee plus time and effort?

It depends a lot on the lender and how they calculate their IRD (Interest Rate Differential) Penalties. Who is the lender?
.
Deal Addict
Aug 7, 2003
2996 posts
172 upvotes
I was able to break mine 13months into a 5yr fixed 4 months ago and started a new 5yr with the same institution. They normally charge IRD, but gave me a break and only charged 3months interest. They called it an early renewal. .My rate dropped 1.39% and on a 700k mortgage, I'll save me 30k+ on the remaining original term.
Never hurts to ask what options they may offer. Just blame covid.
I'm with ATB btw.
[OP]
Deal Addict
Apr 7, 2011
2002 posts
496 upvotes
Hamilton
Thanks all, didn't expect much. I'm just a bit salty since they put what the new rate would be on my annual statement which kinda rubs it in.
Deal Addict
Jan 1, 2013
2000 posts
1263 upvotes
Durham
Its called a blend and extend. You won’t get the lowest but an average of your rate vs current rate and extend another 4 years. But depends on your bank.

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