Many homeowners wished they’d asked more questions

when they got their mortgage. They assume there’s

nothing they can do until the mortgage matures. Not

so. A mortgage broker can review your mortgage at

any time and offer tips on how to save money.

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

ask mortgage brokers for a mortgage analysis

– a detailed look at the penalties versus the payoffs –

– to determine whether it’s worth refinancing to get a

lower rate, finance a renovation or roll other debt into

the new mortgage. Like many Canadian homeowners,

you may find that refinancing makes sense.

 

When you signed your mortgage a few years back,

you were thrilled with the rate you had negotiated:

possibly the lowest in your home-owning memory.

That was then.

Who would have believed that mortgage rates

would have continued that marvelous downward

trend? Today, mortgage shoppers are looking at

some of the lowest rates in history, and many homeowners

with existing fixed-term mortgages are

experiencing some “rate envy” about today’s rockbottom

mortgage rates.

It might be worth a conversation with a mortgage

broker about your options.

 

There are two approaches to refinancing: you can

simply pay out the penalty on your existing mortgage

and start fresh with a new mortgage, or you can opt

for what is termed a “blend and extend.”

Firstly, understand that you won’t reap immediate

rewards when you refinance; it will take time to see

the savings, since you’ll have some up-front penalties.

Your mortgage broker can help you to assess your

“payback” period: the length of time required to see

any savings, based on the penalties you will incur

and the difference between your existing rate and

your new one.

 

Speaking of penalties, what does it cost to get out of

your existing mortgage? Generally, you can expect

to pay out the greater of either a) three months’ interest,

or b) the interest-rate differential. The interest rate

differential can be high; in effect, your mortgage

lender will expect you to pay them the equivalent of

what they will lose by releasing you from your mortgage

and lending the money at current rates. If you are

close to the end of your mortgage, these penalties

may not be too severe, but a quick analysis from your Mortgage Broker can give you the answer.

Don’t be put off by what looks like a big penalty: it’s

only one factor in your analysis.

So is it worth it? Only your mortgage professional

can tell you for sure, but many homeowners are

experiencing significant savings – even with rate

differentials of two points (or possibly more).

Begin with a visit to a mortgage broker, who has

access to rate information from a broad selection of

lending institutions – and who can provide you with

the kind of detailed analysis you’ll need to assess

your options. Many choose to consolidate their other

debts at the same time in order to maximize their

savings & improve their credit.

 

This article is brought by Brian Marling of Mortgage Intelligence

905-376-5326