Mortgage Transfer. Should you do it?
What is a mortgage transfer?
A mortgage transfer is when you take your existing mortgage and transfer it to a different lender. You must keep the exact same mortgage balance and amortization cannot be extended. Borrowing additional funds or extending your amortization would fall under a refinance and then different rates and fees apply. Check out our refinance page here. Most mortgages are transferable. If your mortgage is transferable you can generally transfer it at renewal, no penalty would apply, or in the middle of the term, you may have a penalty to do this.
Can you do a mortgage transfer to take advantage of today’s low rates?
Maybe you have been noticing low rates being advertised all over the place and your current mortgage rate is much higher than what is being advertised. You want to take advantage but you aren’t sure how or if it makes sense. This is where we come in. We offer homeowners free no obligation mortgage checkups. We are able to tell you if it makes sense to transfer your mortgage and take advantage of lower rates. This is always worth checking.
Lets talk about our client John Smith*. John has a mortgage with a balance of 464000. John’s current mortgage rate is 2.64%. His current mortgage renewal date is not until May 2022. The 5 year rate being offered to John today is 1.79%. John really wants to get this lower rate but he is worried as he will have a penalty if he breaks his current mortgage term. We need to find out a) how much he will save if he early renews vs. waiting another year and a half and b) what John can expect to pay for a penalty to break his current mortgage term. In John’s case his penalty worked out to be approximately $5600. His approximate savings would be $5400 over the remaining year and a half. So if John decides to take advantage of today’s low rates it will cost him $200. So we can see that John will not really save any interest over the remaining term by early renewing but this is only part of the picture. What John does gain is another 5 years of security locking in some of the lowest rates we have ever seen. We cannot predict what rates will be in 2022 so John decides that $200 is a worthy expense to ensure he doesn’t miss out on these rates. If he waits the rate being offered to him could be much higher and he will have cost himself much more than $200.
So is it for you?
Everyone’s situation is going to look different. It may not be beneficial to break your current term. Or it very well may be the best decision you could make. We are here to give you the right advice and guide you through the process. The most important thing is that you are being proactive and not missing out on any opportunities that will save you money in the long term.
As mortgage brokers we are professionals. We have years of experience getting the right mortgage for all of our clients. We like helping people save money and we like helping people accomplish goals surrounding home ownership. Give us a call for your mortgage check up and see if you can save money.
*name changed for privacy