Thinking about switching a mortgage?

Rates change, life changes and families goals can change over the term of your mortgage. Most people lock in for a 5 year term, but would you be surprised to know that most mortgages last only 3 or 4 years? If you are considering breaking your mortgage early, you are certainly not alone. So here are the best items to consider:

How do you want your life to look?

Once a year, it is smart to evaluate how well the mortgage is working for you. Ask the questions:

• Are the payments ok?
• How long do I intend to live in this property?
• Can I afford to increase my mortgage payments?
• Am I happy with the “fixed”/ “variable” rate type of mortgage I am in?
• Would I like to add a line of credit to my mortgage?
• How is my debt load – is it increasing or decreasing?
• What changes/ renovations would I like to achieve in this home?
• Will this home meet my families needs in the days to come?

These questions will assist you in establishing a 5 year plan, set mortgage goals and make your mortgage work for you.

What are interest rates like today?

No better way to put a smile on your face than to pay less for exactly what you have now! Rates go up and down, so there are times of the year, economic phases etc where rates become very cheap. Being curious about switching to a different lender could save you thousands $$$.

What will interest rates be like when it is time to renew?

Forecasting mortgage rates is extremely difficult as no one can be sure exactly what the future trends will be. This being said, your mortgage professional should be able to advise you if rates are expected to rise or fall. You dont want to lock in when rates are at the peak, so early renewal can be a really smart move.

What will my penalty be?

Anytime a mortgage agreement is broken by early renewal, the bank charges a penalty for the “lost interest” they would get if you paid your mortgage for the full term. Mortgage payout penalties can be calculated as 3 months interest payments – true of variable or new fixed mortgages, or IRD. IRD is a complicated calculation which identifies how much money the bank will lose if you break the mortgage today. The calculation asks :

1) what interest rate are you contracted to pay.

2) what interest rate can the bank sell your mortgage money for today (5 yr money is more expensive than 2 year money...so, if you only have 2 years left to pay, the bank charges you the difference between them.

3) How long did you have left to pay?

4) How much do you still owe?

IRD calculations vary at each bank and are VERY complicated. Ask for help if you want further clarification. Asking your bank is the only way to get the exact penalty that will apply to your mortgage.

TIP – mortgage penalties often increase on your mortgage anniversary date! Make you move before if you want to save.

Switching a mortgage can be as simple as just changing lenders to get a better rate, but you can change so much more. Amortization, payment type, mortgage type, mortgage amount and other decisions can all be made when doing a switch.

Have a quick question? Text me at 250 682 6077 and I will try to answer you back right away!

Getting the lowest rate is only part of the process