5 years ago today, the 5 year the Posted rate was sitting at 6.65%. The best discounted rate on the market was a 5.19% quick close. At the time this was a great rate.
Here we sit in 2012 the 5 year posted rate is 5.29% and the best 5 year rate is 3.29%. Wow what a difference 5 years makes. Now that we can look back, 2007 was not the best time to buy a home. There is a bright spot however, you are able to pay your mortgage faster and possibly with less burden than some who are getting their mortgages today.
Lets say you started off with a $300,000 mortgage in 2007. Your amortization was for 30 years and you locked into the 5 year quick close rate of 5.19%. This would make your mortgage payment $$1635.26 per month. If you did not do any lump sum payments, and you did not change your mortgage to a bi-weekly rapid payment your remaining balance would be roughly $276,008.65. You would also have 25 years of mortgage payments left.
Now here you sit today with options. Renew into the low rate of 3.29% and lower your payments from $1635.26 to $1347.61 saving you a total of $287.65 per month, that is a great option, but is it the best option?
If you were to keep your same payment you can lower the amortization so you can payoff the mortgage a lot faster. By keeping your mortgage payment at $1635 per month and taking the 3.29% rate you can start your new mortgage at a amortization of 19 years. That alone just saved you 6 years of mortgage payments! Change your payments on this mortgage from a monthly payment to a Bi-weekly rapid payment and when your mortgage renews in 5 years again you will have 12 years of mortgage payments left! That’s 18 years of mortgages off your mortgage in just 10 years of paying.
Another option is to take advantage of these low rates and go with the low 10 year rate at 3.89%. This option would leave you the option of lowering your payment by $200 per month or lowering your amortization again. Your new amortization would be 20.5 years, saving you 4.5 years of mortgage payments. This 10 year mortgage has great benefits as well. Not only are you locked in at a great rate for 10 years, again if you were to change your payment to a bi-weekly rapid payment, on renewal you would have just 8 years left of the mortgage. That again is 22 years of mortgages done in just 15 years.
There are many options to take advantage of mortgages, this is just one renewal option. Make sure you talk with someone who is trying to help save you money not make the banks money.
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Dont just get a mortgage, KNOW your mortgage!
Thanks for reading
Scott Bourke, AMP
Dominion Lending Centres Regional Mortgage Group
Follow me on twitter at http://twitter.com/reddeermortgage