With mortgage rates still hovering near historic lows, chances are you’ve considered breaking your current mortgage and renewing now before rates rise any further.

Perhaps you want to free up cash for such things as renovations, travel or putting towards your children’s education? Or maybe you want to pay down debt or pay your mortgage off faster?

If you’ve thought about breaking your mortgage and taking advantage of these historically low rates, feel free to give me a call to discuss your options.

In some cases, the penalty can be quite substantial if you aren’t very far into your mortgage term, but we can determine if breaking your mortgage now will benefit you long term.

People often assume the penalty for breaking a mortgage amounts to three months’ interest payments so, when they crunch the numbers, it doesn’t seem so bad. In most cases, however, the penalty is the greater of three months’ interest or the interest rate differential (IRD).

The IRD is the difference between the interest rate on your mortgage contract and today’s rate, which is the rate at which the lender can relend the money. And with rates so low these days, the IRD tends to be greater than three months’ interest. Because this is a way for banks to recuperate any losses, for some people, breaking and renegotiating at a lower rate without careful planning can mean they come out no further ahead.

Keep in mind, however, that penalties vary from lender to lender and there are different penalties for different types of mortgages. In addition, the size of your down payment and whether you opted for a “cash back” mortgage can influence penalties.

While breaking a mortgage and paying penalties based on the IRD can result in a break-even proposition in the short term, if you look at the big picture, you’ll see that the true savings are long term – as we know that rates will be higher in the years to come. Your current goal is to secure a long-term rate commitment before it’s too late, and here lies the significant future savings.

As always, if you have questions about breaking your mortgage to secure a lower rate, or about your mortgage in general, we are here to help!
 

-Cory Kline

Mortgage Advisor at Neighbourhood Dominion Lending Centres cory@ndlc.ca or 705-794-1283

Did you know…You can find out your Financial Fitness Score to help discover how financially fit you are. This Financial Fitness Score, the first of its kind in Canada, is available online at www.financialfitness.ca. The score is based on attitudinal and behavioural questions that were developed from financial fitness data collected in a survey sponsored by Genworth Financial and CACCS. The tool helps determine how well you’re managing your finances and provides useful information that is based on your specific fitness level.
For a financial check up please call Cory Kline’s team at Neighbourhood Dominion Lending Centres, we are always available to help.

cory@ndlc.ca or 705-794-1283

With the continued focus on the European Debt situation, bond rates hit the low mark for this year. This bodes well for long term rates staying low for the immediate future. No changes in the fixed or variable rates.

If you have a variable rate of any more than prime +.75 or a fixed rate of 4.50% or more, we should explore the merits of refinancing to a lower rate.  Today’s rates are historical lows, making now a great time to buy or refinance. Contact us for a free, no obligation review. Spending a few minutes could save you thousands of dollars. 

Bank prime is at 3.00% 
The next meeting of the Bank of Canada is on January 17, 2012.  
 If you, your family, or co-workers require guidance on current market trends, please call us, we are always available to help.

Today’s mortgage rates…
Line of Credit: 3.25%
3 Year Fixed: 2.89%
5 Year Fixed: 3.29%-3.39%
7 Year Fixed Special: 3.89% Outstanding offer!!!
10 year Fixed: 4.39%
Free Down Payment: 4.73%
Variable: 2.75%

Thank you,

Cory Kline

cory@ndlc.ca