Hi Guys,

I am currently refinancing my mortgage. In my current/existing mortgage, I have 4 years left(upto 2013). But when refinancing, I am going for 5 years (2014) at the rate of 3.6% fixed. I will be paying the same that I am now with existing mortgage (5.9%). The only difference is the balance amount after 5 years, which is lower than if I keep my current mortgage at 5.9% fixed. Would it be beneficial for me. I am aware that it's not possible to foresee the trend in the next 5 years, but can the rate go any lower than this in future? I also have an option of variable 2.85%, but afraid to go var. now.

Another option that my lender has just provided is 2.9% fixed for 21 months, and then renew in 22nd month at the rate prevailing at that time.

I am confused and couldn't reach on any conclusion. Any help/advise is greatly appreciated.

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Originally posted by febpreet

Hi Guys,

I am currently refinancing my mortgage. In my current/existing mortgage, I have 4 years left(upto 2013). But when refinancing, I am going for 5 years (2014) at the rate of 3.6% fixed.

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Vik

Hi Vik,

The penalty is there and with the addition of it, the monthly payments are almost the same as I am paying now. As mentioned earlier, I am only saving in the long run on the balance after 5 years. It's lower with 3.6% than 5.9%.

Thank you for your advise.

What's the penalty that you're having to pay (if you don't mind sharing)?

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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."

-- Rhett Butler in "Gone with the Wind"

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Originally posted by pratickm

What's the penalty that you're having to pay (if you don't mind sharing)?

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Originally posted by febpreet
Yes sure! It's $20,000 (hugh), due to the fact that it's only been an year since I got into mortgage and the rate is 5.9% fixed. So, it's rate differential.
Thanks

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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."

-- Rhett Butler in "Gone with the Wind"

Oh I see now, you're keeping your payment the same so yes it might work out.
How much lesser balance will you have after 4 years?
Is it worth paying $20,000 and closing costs on the new mortgage (assume $1,500)?
Can you achieve the same by doing a lump sum payment of $21,500?
I don't know all the parameters, so can't calculate but you can try plugging in everything into a web calculator.

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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."

-- Rhett Butler in "Gone with the Wind"