Given that mortgage rates are so low right now, should I switch from my higher fixed rate to the current lower rate ?
May 3, 2009
Great Question Shawn.. this is exactly what most Canadians seem to be asking too…..
The good news is “probably”…. But please let me explain why,you want to look MUCH deeper into your numbers and MAKE SURE…. (Well with your Mortgage Teacher of course). One of the key numbers is your total payout?…. Sometimes we have to ask the same thing, but in a different way…….Sometimes I ask the bank….”If I were to come across some money, how much would the TOTAL cost be to get out of my mortgage?”… this can allow you to JUST get the TOTAL payout amount (balance, penalty and discharge fee), and not be put through to a possible sales agent. It is important that you and your family have ALL the accurate numbers before making any decisions. This “should” also eliminates any surprises with the payout as the new plan gets set.
My team and I have recently used 20 mortgages we currently have on the books as examples to see what the average person could be doing. These existing loans range from $180,000 to $320,000 as far as the mortgage amounts. The rates range from 4.90{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} to 5.99{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8}.. 8 of the examples were 10 year fixed loans. Most of these are only 2 – 4 years into either a 5 Year or a 10 year term. One main thing we noticed is… with rates changing week to week, the penalties and new savings also change week to week…… So it made us realize that this action should be done with in a 2 week period to help stabilize the results.
Here is the results:
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15/20 were worth switching to the lower rate !!
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Savings ranged from $9400 to $16,800 over the next 5 years!!!.
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7/8 of the 10 year mortgages showed savings.
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8/12 of the 5 year fixed also saved.
So to sum it up…….Yes, 75{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} are typically finding savings, but each case is different and needs to be examined right down to the final day of discharge. If you would like to see if you could save feel free to email me michael@themortgageteacher.ca and my team and I can follow up and help guide you on what to do next.
Remember Shawn, No Obligation…… just number crunching for now
Michael Mullis AMP
