By Riki Unrau

With interest rates dropping back down after a short lived increase many Canadians are wondering if it might be a good idea to take advantage of those low rates. But what do you do if you already have a closed mortgage?

Typically, we think of a fixed term mortgage as a non-negotiable contract. And it’s true that there are financial penalties to re-negotiate. But, in some cases when you compare those penalties to the savings over a new term the proof is in the pudding.

You are probably asking what it costs to get out of your existing mortgage? While this varies and requires a complete analysis, generally, you can expect to pay the greater of either:

Three Months Interest – Just as it sounds

–OR–

The Interest Rate Differential – This almost always is the heftier penalty. It can be quite high in some cases and increases with the more time still left in your term. Your mortgage lender will expect you to pay them the equivalent of what they will lose by releasing you from your mortgage and lending the money at current rates.

So is it worth it? For some homeowners it can be an important moment of opportunity, while for others, it may not be worth the costs involved. Most lenders will include the cost of the payout penalty and other costs into the new mortgage so you don’t have to be out of pocket to complete the transaction.

If you are interested in finding out more please contact your local mortgage broker for a quick analysis. Who knows? You could save thousands in the coming years simply by slashing that rate. Something like that is always worth looking into.

– Riki Unrau is a Mortgage Broker with Invis Williams and Associates, located at 828C Baker Street, Cranbrook, BC V1C 1A2 – 250-919-6402. For more try: rikiunrau.com

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