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Are we getting too comfortable with such low rates?

We have had an incredible season of record low rates. Having run the 'cost to refinance' numbers, many people have refinanced and locked into really low rates. 4 year rates as low as 2.74% and 5 year's between 2.99% and 2.79%. Beware the restrictions on some of these mortgages though - read the small print.

How about 10 years at 3.69%? 2 years ago, 3.69% was a great rate. Now we kind of look at that rate and want something lower. Bond rates are starting to move which means we could see the mortgage rates increasing soon. Who knows where the rates will be in 4 years and 5 years time when your mortgage is up for renewal.

Locked in at that rate for the next 10 years could be a very good risk to take.

Let the Numbers Do the Talking before you make any changes to your mortgage. You must know that a change is in your best interest and you are not just doing a refinance because your friend, bank or broker thinks it's a good thing.

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Warwick Johnston
Milton Mortgage Specialist at RBC
647-274-6029

Yes - thank you M for the call. Just to clarify - when you look at the numbers to refinance, be sure to include the following costs in your calculations:
* Mortgage Penalties - either 3 months interest or an IRD (Interest Rate Differential)
* Any additional Administration or Discharge fees the lender will charge
* Legal Fees - on a refinance should be around $550 - $675, including disbursements
* Appraisal Fees, if lender requires - generally around $220 to $285, depending on the area and property

Mortgage Brokers get paid by the lenders, so if your mortgage is being placed with any of the standard lenders, you should not be paying an additional broker fee.

If these numbers all work in your favour, then equally important is the question of which lender and which mortgage product. All too often people focus just on the rate and get locked into mortgages that are very restrictive and expensive if they want to make changes later down the road.

Take the pressure off - Let the Numbers Do the Talking

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Warwick Johnston
Milton Mortgage Specialist at RBC
647-274-6029

Hi JWarren
Great questions. I use a comprehensive spreadsheet that takes all the numbers into consideration, including all the costs as well as your mortgage payment, property taxes and numbers required to qualify with the lenders.

No - you are not obligated to refinance. The numbers will firstly tell you if a refinance is in your best interest and secondly I will be the first to tell you if it is not in your best interest.

To answer your bank comment - This happens often. I had an exact situation with a client a few months ago. He had approached his bank twice over a year and both times was told it would cost him too much to refinance. This is what his numbers looked like:
Previous Situation: Mortgage $233,000, Interest Rate 5.69%, Penalty $8,961, Discharge Fee $200, Credit Card Debt $3,700
Current Situation: Debt Consolidated and Mortgage refinanced at 3.34%, saving $336 per month and not increasing the amortization period. Compared to his previous mortgage, he will now pay $18,241 less in interest over 5 years, his mortgage balance will be $8,414 better off after 5 years and we were able to add a HELOC (Line of Credit) of $25,000 giving him access to emergency cash if he needs it. He was encouraged to take at least half of the monthly saving and increase his mortgage payment, which will pay off his mortgage 6.1 years earlier.

That is why it's important to check the numbers. There are times that the numbers don't work and it is not worth switching.
Hope that answers your questions.

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Warwick Johnston
Milton Mortgage Specialist at RBC
647-274-6029

Another great feature of the 10 year mortgage is that after 5 years, the mortgage penalty calculation changes from the greater of 3 months interest or the IRD (Interest Rate Differential) to only 3 months interest.

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Warwick Johnston
Milton Mortgage Specialist at RBC
647-274-6029

There is one lender left who is offering the 3.89% for 10 years. Most lenders are increasing rates. Last chance if you would like to secure this rate - call me

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Warwick Johnston
Milton Mortgage Specialist at RBC
647-274-6029

Another big benefit of the 10 year mortgage is that after 5 years, the maximum penalty to break the mortgage is 3 months interest. The IRD (Interest Rate Differential) calculation is not applied. So you have the security of the low rate for the full 10 years but you can get out at low cost any time during the last 5 years.

Let the numbers do the talking when looking at all the costs to switch or refinance. I would be more than happy to run the numbers for you.

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Warwick Johnston
Milton Mortgage Specialist at RBC
647-274-6029

Just an update to this previous post. We can now get a 10 Year rate at 3.69%. Obviously subject to credit qualification.
Let me know if I can run some numbers for you.

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Warwick Johnston
Milton Mortgage Specialist at RBC
647-274-6029