Who would have believed that mortgage rates would move so low? Today, mortgage shoppers are looking at some of the lowest rates in history, and many homeowners with existing fixed-term mortgages are experiencing “rate envy” about today’s rock-bottom mortgage rates.
It might be worth a conversation with a mortgage broker about your options. Typically, we think of a fixed term mortgage as a non-negotiable contract. And it’s true that there are financial penalties to re-negotiate. But, many homeowners have been asking for a mortgage analysis- a detailed look at the penalties versus payoffs- to determine whether it’s worth refinancing. Lake many Canadians, you may find that refinancing makes sense.
There are two approaches to refinancing: you can simply pay out the existing mortgage and start fresh with a whole new mortgage, or you can opt for what is termed a blend and extend.
Firstly, understand that you may not reap immediate rewards when you re-finance: it may take time to see the benefit. Since there can be upfront penalties. So if you’re going to sell your home in the next year, you’re unlikely to benefit from a re-finance now.
Your mortgage broker can help you assess your “payback” period: the length of time required to see any savings, based on the penalties you will incur and the difference in your existing rate and the new one.
Speaking of penalties, generally you can expect to pay the greater of either a) three month’s interest, b) the interest rate differential. Interest rate differential can be high, if current rates are considerably lower than what you currently have. However if you are close to the end of your mortgage the penalties may not be high. The detailed analysis will outline the best options for you.
So is it worth it? Only your mortgage professional can tell you for sure. Many homeowners can experience significant savings with a refinance to a lower rate. Maybe it's time to consider a Mortgage Checkup!
Begin with a call to your mortgage broker, who has access to rate information from a broad range of lending institutions and who can provide you with the kind of detailed Mortgage Check-up you’ll need to assess your options.
Contact us and we'll customize the right mortgage for you.
Elfie Hayes (AMP)
Mortgage Agent FSCO Lic M08001377
Mortgage Intelligence FSCO Lic MI-10428
905-443-0197 or www.lowrate.ca
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