With the recent Bank of Canada interest rate cuts, and the noticeable savings passed down by the banks, the thought of refinancing has probably crossed your mind. But does it make sense to pay a hefty penalty to get out of your current mortgage?
Well, that depends. To figure out if it’s truly worth it, you’ll have to employ a bit of math – is the cost of the penalty less than the amount of money you’re going to save? If you’re looking to free up some cash, and you’d be saving more in the long run than the cost of the penalty, than it would be wise to go for it.
In other situations, it might be more trouble than it’s worth. For example, if you put less than 20% down on your home, and you’re in an area where property values are declining, you could be out of luck. You can’t refinance for more than 90% of the value of your property. On the other hand, if the end of your mortgage term is near, you might want to save yourself the penalty all together and wait it out until it’s time to renew.
Different lenders and different mortgage products have different penalties. If you’ve been thinking about breaking your current mortgage, feel free to drop me a line to discuss the specifics and figure out if this strategy will work for you.
