Is Now the Time to Refinance My Mortgage?

September 10, 2012

Interest rates are low. Mortgage lenders are competing for market share. And I’ve been getting asked often from homeowners the question: is now the time to refinance?
Is Now The Time To Refinance Your Mortgage? 
There are obvious benefits to arranging a mortgage with a lower fixed rate. You save money on interest payments. But the interest savings you get from a lower rate are often negated by the costs associated with breaking your existing mortgage.
The penalty to break your mortgage is calculated on the difference between your current mortgage rate and current market rates. This penalty is called the interest rate differential and only applies to fixed rate mortgages. The resulting penalty works out to approximately what your interest savings are.
What If I’m In A Variable Rate Mortgage?
If you are in a variable rate mortgage the penalty is only 3 months interest which is a different conversation.
There can be a case made for refinancing because rates are at an all time low. By refinancing today you are locking into a new fixed 5 year term vs. renewing at some point in the future when rates maybe higher.  We don’t have a crystal ball and it’s impossible to say but rates will eventually increase. The million dollar question is when?
There really is no right or wrong answer to the question: is now the right time to refinance? There are some advantages and disadvantages (i.e. re qualifying, legal fees, discharge fees, penalties). Given my perspective on the market I can’t say with certainty that one is better than the other. There may be other personal factors that could motivate the refinance but all things being equal the choice is yours to decide what makes the most sense to you.
Are you interested in applying for a refinance? Talk to me. I’d love to chat and give you a no obligation quote.


Christopher Molder

Mortgage Broker

Christopher is a mortgage broker based in Toronto, Canada. And a son of a broker too. He’s a second generation mortgage broker. Following in his father’s steps he joined the family mortgage business straight out of university.