When it comes to fixed rate mortgages, the 5 year term is
the most common. While most people think that shopping around for the lowest
interest rate is the most important aspect of choosing a mortgage, choosing an
appropriate term is equally as important. Here is an example:
If you were to have taken out a $300,000 mortgage in 2009 with a 5 year term at 4.5% and you were wanting to get out of that mortgage 2 years early, you would have to pay roughly $11,000 in discharge fees (depending on the lender). If you would have taken a 3 year term at the time of origination at 4%, your payments would have been just over $80 less a month. You would also have paid approximately $4400 less in interest over the 3 year term. The savings of the penalty in combination with the lower interest rate is over $15,000!
If you intend to keep your mortgage for the full 5 years, there are clear benefits of locking into an ultra-low rate for a longer period of time. With rates as low as 3.89% for a 10 year term, many are locking in even longer. However, if you are not certain, then it is important that you speak to a Mortgage Broker who can recommend the most suitable product to fit your situation and goals.
www.christinebuemann.com
If you were to have taken out a $300,000 mortgage in 2009 with a 5 year term at 4.5% and you were wanting to get out of that mortgage 2 years early, you would have to pay roughly $11,000 in discharge fees (depending on the lender). If you would have taken a 3 year term at the time of origination at 4%, your payments would have been just over $80 less a month. You would also have paid approximately $4400 less in interest over the 3 year term. The savings of the penalty in combination with the lower interest rate is over $15,000!
If you intend to keep your mortgage for the full 5 years, there are clear benefits of locking into an ultra-low rate for a longer period of time. With rates as low as 3.89% for a 10 year term, many are locking in even longer. However, if you are not certain, then it is important that you speak to a Mortgage Broker who can recommend the most suitable product to fit your situation and goals.
www.christinebuemann.com
*based on a
$300,000 mortgage with a 5 year term, amortized over 25 years. Rate used is
4.5% with a 1% discount from the posted rate. Date of origination used to
calculate penalty is Oct 5/09, date of penalty calculation was Oct 5/12.
Penalty calculators were used from the following lenders BMO, CIBC, HSBC, RBC,
Scotia, TD. All information is assumed to be correct but should not be relied
upon. For information on your payout penalty, please contact your mortgage
lender.
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