it's called early renewal, and i believe all banks offers this ---- it is very important when the rate is on its way up.....
like,,,, now.....
here is an example,
let's say your mtg is up for renewal by jan/28/2009,
we could still offer p% by oct/13/2008,,,,
your bank will ask you to come in for this early renewal at p% ---- or another way to understand it is that,
they could lock p% for you until jan/28/2009 (within 90 days of course)....... if you don't do anything,
you contact the bank by jan/27/2009 and say: my mtg
is up for renewal tomorrow, what kind of rates could you offer me? the bank will say..... p+1% (which is the "current" rates...)
knowing the rate is trending up,
bank will always contact you (letter, phone calls)
about this.
this brings up another topic.............
if your mtg is up from renewal 3 month from now,
and you want to know if you can getter a better
rate somewhere else,
it IS the time to start shopping,,,
let's say i can offer you p+1% now, i will load an application and hold it for you until your maturity date....
if the rates went up to p+2% 90 days from now, i could still offer you p+1 if you lock it w/ me today.
if you approach me 90 days later, one day before your renewal, and the rate then is p+2%
then i have to say the rate is p+2% --- since i didn't lock it for you.
however, if the rate is trending down,,,, none of these matters...................
*** note: when we discuss variable rates now,
it is important to know there're two factor in the formula:
p% and the +premium (ie, it's p+1 now)........
p could be going down, and the bank
may be adding on the premium,,,,,
for example, few month down the road,
p could be 2% but the bank says i have +2% now.... so the the rate becomes p+2=2+2=4.
if you lock the rate w/ me now, i will secure p+"1" for you for 90 days. if p goes to 2, your application will give you "+1" = 2+1=3%
