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!”
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?”
It’s true. I have access to this great rate. It’s around 0.20% lower than the best rate today. And you won’t see me recommending it to my clients.
That’s right, I’m recommending they don’t take it.
Why? It’s simple. No, I don’t want my clients paying more on their mortgage. I want to see them PAY LESS to own their homes. This is one of those products that carries an inflated prepayment penalty. Should the homeowner need to get out of their mortgage early, they will be hammered with a ridiculous exit cost. We’re talking 10, 12, even 16 months worth of interest penalty.
Statistics clearly show we are paying or changing our mortgages every 3 years. So, chances are, you will have to pay this penalty. On a $300,000 mortgage, your penalty could be $9,000 or more. Compared with $1,943. That’s a $7,000 difference.
That 0.20% savings on the rate equals $600 per year.. You still think that 2.39% rate is great??
The next time you hear or see something that sounds too good to be true, it probably is. If you aren’t sure, call me or an experienced Mortgage Broker for unbiased advice.
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
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…?”
Earlier this year, Fixed rates hit new all-time lows. This must sounds like a broken record, or for those in the modern error, sounds like a glitch or a skip (somehow, ‘broken record’ sounds better).
5 year fixed rates hit 2.59%. This is the lowest we have ever seen. (before you start emailing me that you’ve seen lower rates, yes, I know.. I see them too and have access to them.. but those products are full of restrictions, limitations and inflated prepayment penalty calculations… for our purposes, I’m only discussing quality mortgage products with no gimmicks or strings attached).
Now, looking at the 5 yr govt of Cda bond yields (this is where fixed rates are closely priced from), we have seen this drop down to as low as 0.70%… it’s been holding steady in the 0.80% range since July. Normally, the 5 fixed rate is priced 1.10% to 1.50% above the 5 yr bond yield.. but the spread has been at or over 1.79% for quite a while. So, why haven’t the fixed rates gone down further? Continue reading “Have Fixed mortgage rates hit the bottom?”