Comments on: Refinancing Your Home Mortgage. Is It Worth It?

By: Leah

Leah — Fri, 12 Feb 2010 20:13:12 +0000

What about paying the IRD, refinancing for a much lower rate and reducing your amortization period (drop to 20 years) but still keep your original payments as was suggested by another post – surely you would save money in the long run as you would be paying much more off your principal than you would have with the longer amortization period and higher interest rate. In addition, keep your payments the same as though you were still with the higher rate 25 yr mortgage.

By: Refinancing Your Home | Canadian Capitalist

Refinancing Your Home | Canadian Capitalist — Wed, 14 Oct 2009 01:24:18 +0000

[...] recently did an analysis on my mortgage to see if it was worthwhile to refinance it. According to my original analysis, it wasn’t since I would be more or less breaking even. [...]

By: Mike

Mike — Mon, 14 Sep 2009 18:05:16 +0000

Shawn – It looks like you are calculating the savings by the payments which isn’t all that accurate.

Your penalty was the above market interest rate on the 5 year mortgage. 4.81% is quite a bit higher than the market rate of just under 4%.

I’m not suggesting the blend/extend was a bad deal but I doubt it’s much different than a regular terminate/refinance.

By: Shawn

Shawn — Sat, 12 Sep 2009 05:47:49 +0000

Interestingly enough, my wife and I opted to look into a blend and extend option through our mortgage provider (MCAP) this past spring after reading about it on one of the blogs. In our case we were 2 years into a 5 year fixed at 5.09%. By blending and extending we brought our rate down to 4.81% (for 5 yrs) and this knocked our payments down about $35 bi-weekly. Not a huge sum of savings at first but it’s about $4500 saved over 5 years (which we can apply to the principal or other) and it cost us a mere $75 to take that option and the paperwork was 1 page or 2. No legal fees or termination fees required in blending and extending.

If we only look at what we saved for the remainder of our mortage now (3 yrs), it works out to $2700 and unless rates are less than 4.81% in 3 years, then we should be ahead there as well.

Since then I’ve advised several friend to look into such options (B&Ext.) and the common response is “my institution/advisor says it would be too costly to do it” (CIBC, RBC, Van City Credit Union…). Don’t have any figures of what these institutions charged above and beyond the $75 fee MCAP charges to do the same.

Hope this was of value to the post.

By: Four Pillars

Four Pillars — Fri, 11 Sep 2009 19:01:58 +0000

Scott – that sounds like a great deal. So I guess the key is getting the best interest rate on the new mortgage.

By: Scott

Scott — Fri, 11 Sep 2009 18:25:59 +0000

The difference in interest over the 3 years remaining was about $9000, (difference between 4.89% and 3.75%). The differential was about 1/2 of that or $4500. After legal fees & termination fee (total about $1,000), that left about $3500 for savings (profit).

By: Mike

Mike — Fri, 11 Sep 2009 18:00:11 +0000

Scott – that’s a good point. I just used ING’s numbers for convenience. I’m sure you could do a bit better (but not a lot better) by shopping around.

How do you figure you saved $3500? What about the termination fee?

By: Scott

Scott — Fri, 11 Sep 2009 17:26:55 +0000

Mike,

Your estimates assume that the interest rate offered by your bank is almost the same as the interest rate offered by the new mortgage provider.

My differential was calculated as the difference between the current fixed rate (on my mortgage) and the rate being offered on a mortgage equivalent (or close to) what was remaining on my mortgage by the original mortgage provider. In my case 4.89% v. 4.29%.

The real savings came from the difference between the rate used as the differential and the competitor’s rate, in my competitor was offering 3.75%.

Thus saved the (4.29% – 3.75%), ~0.54%, less legal / application fees. In the end I saved about $3500 for about a day of work / running around.

By: This and That: Bank of Canada Interest Rate Decision and more… | Canadian Capitalist

Fri, 11 Sep 2009 00:49:48 +0000

[...] Four Pillars notes that refinancing a mortgage may not actually save any money. [...]

By: A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com

A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com — Thu, 10 Sep 2009 22:48:39 +0000

[...] Four Pillars discusses what to look at when considering if you should break your mortgage for a better interest rate. [...]