Are you thinking of making a move, but you're stuck with a large payout penalty?
Lindsay Labrecque of Spire Mortgage uncovered a little secret to help you deal with your big payout penalty in order to make a move.
In December of 2018, interest rates were at 3.5% and now it's 2% cheaper. That's about $6,500 savings per hundred thousand dollars, in interest alone. That's a lot of money.
There are people wanting to move because of this, however, they’re stuck.
Lindsay shared a pro tip for those who are with one of the big five banks, the charter banks like Scotia Bank, Bank of Montreal, Canadian Imperial Bank of Commerce, Royal Bank of Canada, and TD Canada Trust.
You can call your bank to find out what your penalty is and then ask the rate if you want to blend your mortgage. You can blend your current interest rate with the new rate. Then, ask what that mortgage penalty will be.
Spire Mortgage assisted a client with that process and their client saved $9,000. From a $10,000 payoff penalty, it went down to a $1,000 change.
When you blend the interest rate, it's still going to be a bit higher than the current rate of 1.59%. It's based on what you're blending the posted rate, because the posted rate last year was a lot higher than it is today. That's how you can calculate that interest savings.
Not many people have an extra $20,000 - $30,000 sitting in their bank account to put towards their mortgage, so that's not a typical option.
Decrease Your Mortgage Penalty
There's lots of ways that you can decrease mortgage penalty if you take advantage of your prepayment privilege.
Find out what the blended rate would be on you adding to that mortgage, not what porting the current mortgage is and adding a second mortgage. That's different.
The next step is take your information sheet. It will give you the numbers to identify your payout penalty or the change to do that. After that, you can call a lawyer or speak to a broker.
Seek Expert Advice
A broker is going to come in handy during these times because their rates are a little bit cheaper. They can definitely walk you through each stages.
When brokers instruct the lawyer, they can request to order it early so that they can ensure that your rate or payout penalty is still the same, no matter what happens.
As interest rates decrease, your penalty is going to get higher. So timing is of the essence in trying to figure this out.
The biggest thing that we wanted to get across is that you don't need to be halted by looking just because you have a huge penalty.
We can help you investigate so that you can figure things out.
If you are thinking of making a move and your payout penalty is large, there's options. You can give Lindsay a call or send her an email.
You can contact her at (403) 703-3019 or email@example.com. If you need more information about blended mortgage, head over to spiremortgage.ca.