With mortgage rates still hovering at historic lows, chances are you’ve considered breaking your current mortgage and renewing now before rates begin to rise.
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 or send me an email 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 general mortgage questions, I’m here to help!
New Homebuyer Calculator & Mobile App
Canada Mortgage and Housing Corporation (CMHC) recently introduced two new tools to help Canadian homebuyers make informed and responsible home-buying decisions – including a calculator and mobile app.
CMHC’s new Debt Service Calculator allows homebuyers to evaluate their financial situation and understand how much they can comfortably afford to spend on a mortgage. The easy-to-use calculator allows users to quickly estimate their gross debt-service ratio (GDS) and total debt-service ratio (TDS) – both important measures in assessing their financial readiness for homeownership. The Debt Service Calculator can be accessed by visiting: www.cmhc-schl.gc.ca/en/co/buho/buho_005.cfm
CMHC’s new ‘Ready, Set, Home’ mobile app provides consumers, particularly first-time homebuyers, with comprehensive CMHC information and tools at your fingertips. The app helps homebuyers keep track of the details throughout the home-buying process and provides access to a variety of helpful calculators, articles and other resources.
Recognizing the increasingly fast-paced, electronic and mobile environment, the new ‘Ready, Set, Home’ mobile app is a free application that offers quick and convenient access to CMHC’s extensive housing information. The app can be downloaded to your Blackberry, Android or iPhone device at: www.cmhc.ca/mobile
These new tools are the latest additions to CMHC’s comprehensive suite of free resources available to support Canadian homebuyers
As Mortgage Brokers within Dominion Lending Centers Harmony Mortgage Brokers offer more that the average Mortgage brokers
- We are Canada’s largest and fastest-growing mortgage brokerage!
- We have more than 2,200 Mortgage Professionals from more than 350 locations across the country!
- Our Mortgage Professionals are Experts in their field and many are ranked among the best nationally.
- We work for you, not the lenders, so your best interests will always be our number one priority.
- We have more than 100 mortgage programs, making it easy to choose the best fit for your unique situation.
- We close loans in all 10 provinces and 3 territories.
- We can process your mortgage in as few as 7 days.
- We are the preferred mortgage lender for several of Canada’s top companies.
Harmony Mortgage Professionals are not your everyday average mortgage brokers!