It’s all the news can talk about this past week with banks competing on mortgage interest rates. Even though low rates have been offered for the past month by non-bank lenders the media announcement only hit the streets over the past week. So what are your options when mortgage rates drop?
Mortgage rates drop
When mortgage rates drop it is a great time for home buyers. Your cost of borrowing is lower and you can afford to buy more with your money. With the 5 year fixed rates around 2.89% home buyers are hitting the streets to get the savings. The bi-weekly cost of a mortgage per $100,000 (based on a 25 year amortization) is $215. For a first time home buyer looking at a $250,000 condo mortgage that is $1074 per month — under $1500 if you include property taxes and strata. For those who want to go variable or in a short term rate the costs are lower still.
If you have an existing mortgage and wonder what are your options when the mortgage rates drop, talk to your mortgage broker. There may be savings for home owners currently in mortgage terms with 1-4 years left and interest rates over 3.5%. It is hard to believe but in some cases – even with a penalty – the savings can be significant depending on the remaining term.
For example I contacted a client when the mortgage rates drop was starting and saved a them 10 years of payments by taking them from a 31 year amortization to 21 years! That means 10 years less in bi-weekly payments of $1200. They had 1 year left on their mortgage term at 3.85% and I renewed them into a 5 year fixed rate at 2.89%. By maintaining their existing payments at the higher rate they will shave 10 years off their mortgage. What would you do if you could pay off your mortgage 10 years sooner?
For more information on renewing your mortgage early call me at 604 813 8402 or email pauline@mybcmortgage.ca