Mortgage Prepayment Privileges Can Protect You Against Mortgage Shock

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( — August 7, 2013) Surrey, BC — Many people are being set up for mortgage shock if rates normalize and they renew their sub 3% mortgage at expected future 5% fixed rates. Few mortgage holders realize they can take advantage of existing little-known Prepayment Privileges to avoid a drastic increase in payments on renewal.

Maple Ridge Mortgage Broker, Kris Grasty says he is not fond of using the term ‘Mortgage Shock’ in light of all of the negative press the real estate industry sees daily.  “The press seems to always be negative” says Grasty.  “Reality is that if employment remains stable, the housing industry will too.  People will always need somewhere to live; the issue is simply affordability.”

“The only ‘negative’ press that I can see is in regards to the actual rise in fixed rates as of late,” Grasty continues. “I have been speaking about this issue to friends and clients alike for six months, and it isn’t crazy to think that rates could normalize between now and 2018.  I recall being happy to pay 5.25% several years ago.”  When asked about where the ‘Mortgage Shock’ is, Grasty pointed out that at a future 5% rate a mortgage payment could be substantially higher on renewal for people currently locked in with sub 3% rates.

Recent “Stress Test Your Mortgage” articles in the Financial Post and by Canada Mortgage Trends highlight similar issues.  

Grasty’s blog post: Interest Rate Inflation Hedging details a solution. 

Grasty states that this is a service and strategy often overlooked by clients, lenders and other service providers.  “Most clients have Prepayment Privileges that go unused.  Very few people are using this to their advantage and it is an easy thing to do for them.”  When prompted for information on this Strategy, Grasty says “Interest Rate Inflation Hedging sounds impressive but it’s just simple math I use to advise clients on when and by how much to exercise their prepayments.  Adding fifty or sixty dollars to their payments now could help the client avoid a drastic change in payments on renewal.”

 “An overlooked option that makes sense is to make prepayments in step with rate increases to keep your monthly payments predictable on renewal.”

Interest rate protection is more than just locking into a 10 year term, Grasty says. “Ask your Mortgage Representative what term they are in personally and why.  I bet they are not in a 10 year.” 

Grasty says it is simply smart money management. 

Kris Grasty is a Mortgage Broker with Dominion Lending Centre’s #1 funding office in Canada, Canadian Mortgage Experts.


Kris Grasty


DLC Canadian Mortgage Experts

#501 – 17665 66A Ave Surrey BC V3S 2A7

(778) 878-7787

Kris Grasty – Mortgage Expert on Facebook