A few weeks ago, I posted an article about one of my readers that had the potential to save $15,000 by breaking the mortgage and getting into a new 5 year fixed rate. This was a net savings. The actual savings was just over $20,000 less the penalty of $5,000.
This week, we had an even bigger savings. My clients are in a 10 yr term at 3.59%, with a $710,000 balance and 8 yrs to go. The penalty to break is $6500. The savings is $29,000. Result is a net savings of $22,500. Wow! $22,500 savings over the next 5 years! That’s $4500/ year in savings!
This type of savings opportunity is extremely rare. I’ve only seen this level of savings a few times before. We can thank the record low interest rates for that.
If you are in a mortgage with a rate that’s above 3.20%, then you could be missing an opportunity to save $$thousands. You should at least consult with a Mortgage Broker to do the math. Remember, I haven’t even listed the lower rate product options available, such as Variable rate, or a 3 year fixed rate. It’s worth looking into.
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
Look, I don’t advocate paying penalties, however, if there is an obvious savings to be had, then you have to do it. We’ve reached a point where interest rates are so low, it’s worth a review. Here are some recent experiences with real people…. Enjoy.
I had one of my readers contact me about breaking his mortgage… His current mortgage with a good lender.. a Non-bank lender.. his rate is 3.59%. He took a 10 yr term last year. Balance was over $500k. So with 9 yrs remaining, we reviewed his options.
This was a no brainer. Penalty to get out was under $5,000 (lucky he was with a non-BIG SIX BANK). But the savings over the next 5 yrs would be $20,500. His net savings is $15,000. Would you I recommend he break the mortgage? Absolutely! Continue reading “$15,000 savings by breaking his mortgage early and getting into today’s low rates.”
Spring is the home buying season. Summer is the mortgage renewal season. It’s been that way for as long as I can remember. Most of us want to move in the summer months when it’s warmer and when kids are out of school.
Once again we’re seeing the BANKs calling borrowers ahead of their actual renewal date. And once again, they’re counting on you believing they have your best interest at heart. And once again, I’m here to warn you against signing those offers without having a discussion with your Mortgage Broker. In most cases, if not all, those offers aren’t that ‘special’.
Here’s just one example of that trust costing this Scotiabank client $3,000.
Just this week, Scotiabank offered one of my clients a renewal at 3.49% for a 5 year fixed rate…Does sound familiar to anyone? It sounded great to him. But for some reason, the client didn’t return my calls, my emails or letters about their upcoming renewal. And I can understand, sometimes life just gets in the way. Besides, it’s Scotiabank…surely, they’ll have this repeat client’s best interest in mind? Surely, they will offer him the absolute best rate?
Guess again… By signing that renewal, and not calling me to verify how competitive the interest rate really was, the client will end up paying around $3,000 more in interest charges over the next 5 years… on a $200,000 mortgage balance. Today’s best 5 yr fixed rates are hovering around 3.19%. The real cost could actually end up being more than $3,000 if the client needs to refinance or pay the mortgage off before the 5 years is up. That’s because Scotiabank, like the rest of the BIG SIX BANKs, uses a prepayment penalty calculation that has the client paying for the original discount given at the time of mortgage funding. This method of calculating penalties is NOT used by all Lenders but it IS used by all of the BIG SIX BANKs.
But we need to also be aware of other Lenders that are offering those too good to be true deals… If you see lower rates, beware.. there’s probably a catch. It could be a NO FRILLS mortgage or some sort of hidden exit fee or penalty.
Don’t take any chances…. Call your Mortgage Broker. One phone call could have saved this client $3,000. If you don’t have a broker, feel free to call me. We’re here to help.
1 866 812 0516
With all the recent talk in the media about ‘rate wars’ and ‘mortgage market share’, it was only a matter of time before we saw this happening. Yes, the Banksters are at it again.
We’re getting reports that Banks are contacting borrowers 4, 5 and even 6 months prior to maturity. Supposedly, they are calling to ‘offer a great rate, if you sign now!’ Hey, that sounds great. Except the interest rates that we see being offered aren’t really that great. In fact, they are higher than what is available in the wholesale market.
This isn’t anything new. We saw this happen in late 2008 and early 2009. The Banks were telling clients to lock into Fixed rates if they were in Variable (and we told our clients to stick with Variable as interest rates were heading down… sure enough, they did go down)…. And they were offering supposed ‘special rates’ 4 to 6 months prior to maturity. The only problem is that the interest rates being offered were not as good as the Banks made it seem. And the timing of the product offerings were clearly wrong.
What makes this problem even more complex today, is that some of the Banks are offering NO FRILLS mortgages with limited prepayment privileges and NO option to pay the mortgage out in full unless you sell the house. They dangle an attractive interest rate but forget to tell you about the product limitations. STAY away from these products. They will come back to bite you in your bottom….. bottom line, that is.
Here’s some advice… Before signing any renewal offer, speak with your Mortgage Broker… find out if that offer and product are really as good as the Bank makes it seem. The stats tell us that most Canadians will not bother shopping and just sign their renewal offer… and that’s too bad. A 0.40% difference in rate on a $250,000 mortgage will cost you $4774 in the first 5 years alone. Don’t be so quick to sign what the Bank offers you… don’t be complacent….you could pay dearly for it.