I originally posted a breakdown of how mortgage penalties are calculated by different lenders on January 4, 2011.
This remains relevant today and, since this has been my most popular article to date, it’s worth a repost!
WE TOOK THE MYSTERY OUT OF HOW PENALTIES ARE CALCULATED
We decided this needed a more detailed explanation… but a strange thing happened when we started to answer these questions. We made a startling discovery. We caution you – the results could get your blood boiling if you’ve had to pay a penalty!
We found that the banks have shrunk or reduced the spreads between their Posted and Discounted rates on shorter-term mortgages over the past few years… and this has had a huge impact on Interest Rate Differential (IRD) penalty calculations. Continue reading “Mortgage Penalties: You could pay thousands to break your mortgage depending on your lender!”
SHORT TERM RATES ARE STILL IN
A few months ago, I said Variable was out, Fixed rates were in. I recommended going with a short-term fixed rate products. The reasons are simple:
- You can get the same or better in a 2 and 3 yr fixed rate term. That eliminates the Variable rate for me.
- 2 yr is 2.19% and 3 yr is 2.29%.
- Variable is 2.30% today. Why choose a fluctuating rate when you can get a guaranteed better rate for the next few years?
- I also don’t like the current Variable rate pricing that’s out there.
- Prime less 0.40% isn’t good enough.. I like to see Prime less 0.50% or better.
Historically, we’ve always done better by choosing short-term rates. And that’s what Variable rates are…A mortgage product priced from short-term funds. The only difference today, is that it makes more sense to lock into 2 or 3 yr fixed term vs choosing a Variable rate.
( you’ll see lower rates advertised.. but be careful. There are so many NO FRILLS products or products that carry inflated penalty calculations, limited repayment options and other hidden fees.. stay away from those)
Hey, want to know which Mortgage Advisor to use? Check out their historical recommendations and forecasts. That should tell you all you need to know about that advisor. And if you can’t readily find those historical forecasts, then walk away and look elsewhere.
Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.
Steve Garganis 416 224 0114 firstname.lastname@example.org
Today, right now, we are experiencing all-time record low fixed mortgage rates. Great news if you need a mortgage. And some of you may be thinking of locking into a longer term mortgage. Let’s take a look at that option.
Going longer could be an option for some. The Best 5 yr fixed is around 2.59%.. some special deals exist for larger mortgages or faster closings… but let’s use 2.59% for now. Does it make sense to pay 0.30% more for the first 3 years of your mortgage, just for the benefit of knowing what your rate will be for the last 2 years?
(a warning… you’ll see lower rates advertised.. but be careful. There are so many NO FRILLS products or products that carry inflated penalty calculations, limited repayment options and other hidden fees.. stay away from those)
Continue reading “Should you look at 10 year fixed rate mortgages?”
For more than a decade, I’ve been recommending Variable rate mortgages, as the product of choice. My clients have saved $thousands. It’s been a great 11 year run.. But now, the strategy has changed slightly. Read on, to see my newest recommendations..
QUICK VARIABLE RATE HISTORY.
First, you need to understand the history.. Variable rate had lots of pluses. It had a lower rate of interest, the penalty can never go over 3 months interest, and you have the option to lock into a Fixed rate at any time.
Being in a Variable meant paying lower rates. In fact, the difference, compared with Fixed rates, ranged between 1.00% and 3.00%. This translated to several $$thousand in less interest each year. Continue reading “Variable rate is out, Fixed rates are in…. But, which term…?”
On November 26, 2010, we reported that a good source told us the govt would not follow through on their promise to standardize mortgage penalties until this spring, at the earliest.
On December 15, 2010, we also reported that discounted Fixed mortgage rates were going up but Posted mortgage rates were staying the same… we stated that your mortgage penalty would not decrease as it normally does when rates go up.
We received some inquires about this article. Questions like ‘shouldn’t my penalty go down if rates are going up?’ and ‘how could a mortgage penalty be more expensive if the Bank’s didn’t increase their posted rate?’
Okay, here’s my shocker statements…. A $200,000 mortgage taken in December 2008 will cost you $16,800 to get out of today…. but 12 years ago it would have cost you approximately $8,340 and even today, it should only cost $11,640. Got your attention? Please read the entire report to better understand. Continue reading “Mortgage Penalties exposed…. an in-depth study reveals unjust penalties.”