Refinancing Your Mortgage Early Can Save You Thousands of Dollars
2020-09-25 | 11:36:09
Refinancing Your Mortgage Early Can Save You Thousands of Dollars
Free Mortgage Review and Consultation
There is a lot of uncertainty in the current economy and many people’s lives and financial situations have changed due to COVID and the impact on the economy. With this in mind, I want to offer you a Free review and consultation of your current mortgage to see if we can save you money.
Current mortgage rates are at an all-time low, and even if your mortgage is not up for renewal yet, you may still be able to save money, even if there are penalties to refinance early. If you have gotten a fixed or variable rate mortgage over the past few years, with a rate over 3%, it is worth taking a look at to see if we can save you money.
An example to illustrate the savings*:
If you have an original mortgage amount of $603,486 amortized for 25 years with a five year term, and a fixed interest rate of 3.24%, monthly payments of $2,930.80 with 3 years remaining on the term and a current balance of $571,000. If you refinanced the balance, plus the penalty of $15,468.30, for a total current new balance of $586,469 at the lower fixed interest rate of 1.99% for a 5 year term, and amortized it over 23 years (same amount left on the original mortgage to pay it off completely) you would lower your monthly payments to $2,647.55 giving you an additional $283.25 cash flow per month. It would also reduce your interest for the next three years from $52,692.33 to $33,087.87. This is a total savings of $19,604.46 in interest, and a net savings of $4,136.16 (19,604.46 - $15,468.30 penalty).
|
Original Mortgage amount |
Current Mortgage Balance after 2 years |
Interest Rate |
Total Interest for remaining 3 years of term |
Penalty to break early |
Monthly Payment |
|
$603,486 |
$571,000 |
3.24% |
$52,692.33 |
$15,468.30 |
$2,930.80 |
|
Current Mortgage Balance + Penalty = New Mortgage amount |
Current Interest Rate |
Total Interest for first 3 years of new mortgage |
Monthly Payment |
|
$586,469 |
1.99% |
$33,087.87 |
$2,647.55 |
|
Savings |
3 Year Total of Differential in Interest Paid |
3 Year Total of Differential in Monthly Payments |
|
|
$19,604.46 |
$10,197 |
If the client decided they wanted to further free up cash flow, they could potentially refinance for up to 30 years amortization and lower their payments to $2,162.37 giving them an additional $768.43 cash flow each month. This would provide them the opportunity to pay extra on the mortgage when they could align with their prepayment privileges, but also free up cash for changing circumstances.
As you can see, it is always wise to review your mortgage regularly to not only save money, and to ensure it is in line with your current financial situation. You may find yourself in need to consolidate your debts (loans, credit cards, credit lines etc..) or looking to access equity to do some home improvements and add value to your home, while at the same time saving money on interest costs.
If you are looking to buy a home, this is the perfect time with today’s incredibly low rates.
I will negotiate the best home purchase, mortgage or refinance for you. If you decide to purchase finance or refinance a home with me, you will receive up to$300 reimbursement in any appraisal or legal fees! So call me today at 647-997-3866 or email me at shelley@rightpathmortgage.ca
Agent Lic #20002106
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*The described refinancing scenario including interest rates are subject to timing, approval and availability. Mortgage penalties vary by lender and type of mortgage.
