Real Estate

Mortgage Renewal Question

  • Last Updated:
  • Feb 7th, 2020 7:54 pm
[OP]
Newbie
Feb 1, 2020
6 posts
2 upvotes

Mortgage Renewal Question

Hi everyone,

Someone recommended that I post my mortgage questions in this forum. Hopefully this will help others as well.

Here’s my scenario. I have a 30 years mortgage, 4 years fixed, monthly payment and and the first renewal was mid of last year for another 4 years with a higher interest rate. I made a mistake of not checking on the details before signing the renewal because this month, when I looked at it closely, the Mortgage principal of the renewed contract looks higher than it was suppose to be.

Since my frequency is monthly, 4 years multiply by 12 months is 48 payments. The original renewal noticed indicates that after the renewal, I’ll be paying the new rate on the 49th payments. But the rate dropped so I renegotiated for lower rate. They agreed and redo the contract with the lower rate. I realized this month that they ended the contract earlier and started my new payment on the 48th payment. This week, I spoked to the staff and she said that since I signed the contract 3 days before the 48th payment, that’s why I started paying the new rate on the 48th payment. I asked them why is it that on the original renewal, it indicates that I will start paying the new rate on the 49th payment. They kept making excuses.

1. Isn’t it that you can sign the new contract before the contract ends and start the new contract after the old contract have ended?

The above is just the beginning, but the bigger problem is that when they ended the contract earlier and also increase my mortgage principal.

On the original renewal notice, my mortgage principal was the mortgage principal of the 48th payment. I was able to download a mortgage calculator. I noticed that the new mortgage principal was closer to the mortgage principal of the 46th month.

Principal of 46th month
Principal of 47th month
Principal of 48th month

2. It’s almost like they added the one month of my mortgage payment to the new mortgage principal. What do you think happened?

Hope you can give me some ideas to sort out this problem.

Thanks!
11 replies
Deal Fanatic
Jan 15, 2017
5310 posts
5426 upvotes
Ottawa
Were you ever late with your mortgage payment at any time during your mortgage term? If so, that may explain the higher mortgage balance.

As you signed 3 days before your last payment, your lender may have considered it an early renewal. Early renewals generally start on the date that you sign and not at the end of the original term. That is, an early renewal causes the original mortgage term to end early.
[OP]
Newbie
Feb 1, 2020
6 posts
2 upvotes
I was never late in my payments.

I'm OK for the term to end early but there's still something wrong with the new principal.

Thanks!
skeet50 wrote: Were you ever late with your mortgage payment at any time during your mortgage term? If so, that may explain the higher mortgage balance.

As you signed 3 days before your last payment, your lender may have considered it an early renewal. Early renewals generally start on the date that you sign and not at the end of the original term. That is, an early renewal causes the original mortgage term to end early.
Deal Fanatic
Jan 15, 2017
5310 posts
5426 upvotes
Ottawa
trippledouble wrote: I was never late in my payments.

I'm OK for the term to end early but there's still something wrong with the new principal.

Thanks!
Make sure that you have downloaded a Canadian mortgage payment calculator with amortization schedule, and not a US as interest compounding is different on mortgages in the US than in Canada.
[OP]
Newbie
Feb 1, 2020
6 posts
2 upvotes
skeet50 wrote: Make sure that you have downloaded a Canadian mortgage payment calculator with amortization schedule, and not a US as interest compounding is different on mortgages in the US than in Canada.
Yes, the excel spreadsheet is Canadian. Thanks!
[OP]
Newbie
Feb 1, 2020
6 posts
2 upvotes
I got my December 31, 2019 Statement and the summary indicates that there was an amount added to my Principal and it's called "Other Adjustments".

Here's what it means on the Glossary of Terms:

Other Adjustments - Interest added to the principal you owe because:
i) Your mortgage term ends on a date that is different from your regular payment date.
ii) You switched from a fixed interest rate to a variable rate (or vice versa) and the effective date is different from your payment date.


Mine is the first one - "i)". What do you think? Does this look like a fee charge for ending the mortgage early?

Thanks.
Deal Fanatic
Jan 15, 2017
5310 posts
5426 upvotes
Ottawa
trippledouble wrote: I got my December 31, 2019 Statement and the summary indicates that there was an amount added to my Principal and it's called "Other Adjustments".

Here's what it means on the Glossary of Terms:

Other Adjustments - Interest added to the principal you owe because:
i) Your mortgage term ends on a date that is different from your regular payment date.
ii) You switched from a fixed interest rate to a variable rate (or vice versa) and the effective date is different from your payment date.


Mine is the first one - "i)". What do you think? Does this look like a fee charge for ending the mortgage early?

Thanks.
It's not a fee per se, but the interest charge between your regular payment date and the date that the renewal happened.

If your regular payment date is the 3rd, your amortization schedule will show your mortgage balance on the 3rd of each month. If you renewed your mortgage say on the 21st, interest has accrued on the mortgage from the 3rd to the 21st. An adjustment will be added to the mortgage balance from your last payment on the 3rd to reflect this interest.
Newbie
Mar 31, 2013
90 posts
23 upvotes
skeet50 wrote: It's not a fee per se, but the interest charge between your regular payment date and the date that the renewal happened.

If your regular payment date is the 3rd, your amortization schedule will show your mortgage balance on the 3rd of each month. If you renewed your mortgage say on the 21st, interest has accrued on the mortgage from the 3rd to the 21st. An adjustment will be added to the mortgage balance from your last payment on the 3rd to reflect this interest.
That means I end up paying more, is that right? In my case, my regular payment is the 22nd and the renewal date was the 19th, 3 days in advanced.

The original mortgage renewal agreement ends on the same date as the regular payment date. The interest rate went down so I negotiated and got the better rate but they quietly ended the term 3 days early on the new agreement.
Deal Fanatic
Jan 15, 2017
5310 posts
5426 upvotes
Ottawa
aperturetech wrote: That means I end up paying more, is that right? In my case, my regular payment is the 22nd and the renewal date was the 19th, 3 days in advanced.

The original mortgage renewal agreement ends on the same date as the regular payment date. The interest rate went down so I negotiated and got the better rate but they quietly ended the term 3 days early on the new agreement.
No, the opposite actually. If the interest rate on your renewal went down and the mortgage was renewed 3 days early, then you saved money by paying a lower interest rate on those 3 days.

You did have to pay interest from the 22nd of your last month's payment to the 19th of the renewal date. Had you not renewed at the 19th, you would have paid more interest as it would have been at a higher interest rate and until the 22nd.
Newbie
Mar 31, 2013
90 posts
23 upvotes
I was not clear in my description. I’ll try to make it clear this time.

My first contract that was about to expire at that time and has an interest rate of: 2.44%

They send me a mortgage renewal proposal with an interest rate of: 2.89%
(The mortgage term end on a date that is the same as the regular payment date with this proposal)

After a few days, the rate of some banks went down to: 2.74 % and they agreed to give me this rate.
(The contract that I signed with them last year doesn’t show the breakdown of the new starting principal. Last January 2020, I noticed that the starting principal of the new contract is higher and later, I received the statement and it was due to the "Other Adjustments" amount.)

So the interest went up from 2.44 to 2.74.
I mean their original proposed interest of 2.89 went down to 2.74.

With the interest rate of 2.74, if they did not move the mortgage renewal date to 3 days early, I would have been paying $3.68 less per month. Also the balance (Principal) of maturity will be $1,584 less than the one with the 3 days early renewal.

In summary, at the interest rate of 2.74, with the early renewal of 3 days, at the end of 4 years, I’ll have a principal of $1,584 higher and at the same time, I paid $3.68 more per month.

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