I am in the 3rd year of a 5 year mortgage. When I took the mortgage out rates were higher than now. Some friends say that I should refinance now? Others say I will have to pay a large breakout penalty and it is better to wait. Who is right?

It all depends on the numbers. Firstly, I would call your existing mortgage holder and ask them for exact numbers of what any penalty would be if you terminated the existing mortgage and took out a new mortgage at the new lower rate.

FYI as at Nov 15/2010

a competitive 5 year fixed rate mortgage is 3.40% and a competitive variable rate mortgage is prime less .70%

Another option for you is to blend and extend your existing mortgage with the new lower rates and extending the term for another 5 years.
It is always a good idea to evaluate your own plans before jumping into a new mortgage and make sure you select a mortgage that fits with your overall financial plan.
I would reccommend getting a quote from your existing provider and get a competitive quote from Royal Bank mobile specialist Brad Vokins
289.385.0406

The answer will depend on the type of mortgage you have. If you call your mortgage company and ask them exactly what your penalty is, you'll have a much better idea of what the right choice for you is. Once you know how much your discharge will cost you can calculate the difference between the rate you have, and the rate you can now get.

Here's a site that will help you with your calculations. www.suttonmember.com/calculator

If the savings over the remainder of your term if more then your discharge will be, you may consider getting a new mortgage.

Feel free to contact me with any other questions.

As always the first word of advise is to sit down with a mortgage representative from your current mortgage institution. Get in writing the following.

1) What is the current prinicple amount.
2) What is the current penatly if I payout my mortgage today.
3) What incentives do you offer if I refinance with you.
4) What rates are available and what are the payments for each rate.

Knowing this will allow you to calculate what you are going to save. There are other financial considerations that would help with the decisions. (IE. Other debt you want to get rid of)

I can recommend a mortgage rep to help you.

I can give you my personal experience as an example. We had a 5 year mortgage 3 years ago at 5.45% fixed. Broke it 4 months ago and went to a variable rate product. I refinanced to get rid of my credit card debt and increased my principle by 25K. With the lower rate I am paying about 700/month less at the lower rate. We calculated that within 12 months the interest saved will equal the penalty we paid for breaking the mortgage.

I had to do those calculations recently. It's a worthwile exercise but you should really get the advise of a mortgage professional. First get in touch with your lending institution and find out what the penalty (if any) will be. Then it's a question of seeing if that penalty is worth renegotiating at today's rates.

You have to check your mortgage and what kind of penlties you will be paying, and calculate what is better for you: the best is to contact your lender and find out, as every situation is different.

Hi again Dorothy
Just happened to find this article published today that you might find useful: http://www.movesmartly.com/2010/11/fixed-rate-mortgage-penalties-paging-mr-flaherty.html

Hello

Most times the penalty is offset by the interest saved. That is why it is called an IRD or Interest Rate Differential penalty. The penalty can be high but this means your savings are also high. This will allow you to refinance now at a lower rate guaranteed for perhaps another 5 years. I would Stay away from the 3 year. I still think the variable at prime less .75% is the best option but 5 year rates can be had for 3.39% fixed right now.

As others have mentioned - contact a mortgage specialist. They will be able to tell you how much your penalty would be and tell you how much you would save at a new interest rate. Once you know these numbers it should be a straight forward decision.

Dorothy, Try these 2 links... http://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca01817.html

http://www.calculatorz.com/united/earlyrenew.cgi

There are many factors so best to speak to an experienced professional. I chose not to refinance now and put the payout penalty I would have paid toward my principle which was a greater saving in interest paid. Also consider, how long will you be in the home? If you plan on staying only a short time then the refinancing will have to pay for itself quickly. If you plan on being in the home for the foreseeable future then you can afford to take a few years for the refinance to pay for itself. All the best. Lisa

Call your mortgage broker in your bank or financial institution. Ask them how much is the penalty for break contract, then ask them to process refinancing. Sometines they will lower charge by half or more if they know you like to stay with them. Always works:)

Call the mortgage institution to find out how much will cost you if you decide to break the contract now. And ask your mortgage brokers of which mortgage lenders are offering to pay your penalties and give you a low rate to transfer your mortgage to them.

Lina Castro, Real Estate Broker and Realtor that you trust!
ADRESZ Reseau Immobilier, Siege Social
To committed Buyers and Sellers in Montreal, Qc send your e-mail now to: linacastrosells@hotmail.com or to: linacastrovende@hotmail.com to subscribe to our VIP Members to be ahead from the competition.

Hi-one thing to keep in mind is the bank calculates the ird on the banks posted rate-not the discounted rate-this is a huge factor in the calculation. Again call the bank and find out how much it is. I had one client who had a penalty of $65,000-wow.

Once you've spoken with your lender to determine your penalty, you can use a mortgage calculator to determine exactly how much your new monthly payment and interest will be. Then you will be able to calculate the savings after refinancing to see if it is worth absorbing the refinance penalty.

Here is our monthly payment calculator to help you (http://www.ratehub.ca/mortgage-tools) and a list of best mortgage rates should you decided to refinance (http://www.ratehub.ca/best-mortgage-rates)

The best course of action is to contact your mortgage company and ask them what it will cost you to break the mortgage. They will readily give you the information and you can decide whether or not it is worth it to wait or not.

I have an excel spreadsheet that if you put all the data it will tell you whether you should refinance now or not. The data you will need is your current mortgage rate and balance to pay, new mortgage amount, new amortization period and penalty to pay.

First go to your bank and have all that data then the decision is very easy.

give me a call (416-834-5631) or email me (iavni@sutton.com) and i will send you the spreadsheet.

You may also checkout the following website:
www.FastTrackMyMortgage.com

You can see in that website how to pay off your mortgage in half the time with the same salary you have. worth a visit!!!!

Depending on what type of mortgage you have it can be a no brainer to do the early renewal. Most variable rate product are simply a 3 months interest penalty so you can have huge savings at doing it now. If it is fixed it is likely an IRD or 3 months penalty. The greater of the two. IRD's can be large enough to scare you away but it will depend on what rates the lender is using to compare to your fixed rate.
Your lender will let you know what the discharge will be but may charge you for this information. Make sure when you ask that they do not put a stop on your account as you are just checking the numbers at this point. Once you have this, check it with a mortgage broker to see if it makes sense for you to break out to get to the better interest rates today.

The first thing you should do is pull out the reporting package you received from your lawyer when you closed on your home purchase or your refinance. The reporting package you received will tell you everything you need to know about your mortgage. The report will tell you whether you need to pay a penalty (or not) and what rights, options, and obligations you have with respect to your mortgage.

You should be careful when you refinance if you have to pay any penalty. The cost of the penalty can outweigh or just balance any benefit you may get from a lower rate. You should speak to a mortgage broker to help you run the numbers.

Carlson.

E: info@carlsonlaw.ca
T: 1-800-313-8316

Firstly you need to find out the payout from your present lender. Whether its the IRD (interest rate differential) or straight interest charge. You then need to sit down and with an experienced broker and calculate whether your new potential mortgage is worth your while.

If your mortgage was from 3 years ago (during the financial downturn) chances are you have a fairly high rate and the savings in today's rates will be worth your while, even after you add the payout cost into the new mortgage. Your savings will still be substantial.
Call anytime for details

Peter K. Yeung AMP-BROKER
Accredited Mortgage Professional
Voted “Top Mortgage Broker” by Metro News
Broker # M08000585 - Brokerage # 10464
416-466-0033
pyeung@rmabroker.ca
Real Mortgage Associates Inc.
peter@ariesenterprise.com
www.ariesenterprise.com