Merits of refinancing to save thousands ...Blog by Jeff Trounsell Centum Pacific Mortgages

It's now January 2012, high canadian consumer debt load is in all the news media, your New Years resolution might have been to work on reducing your debt, so here's a great way of looking at it. Fixed mortgage rates are at historical lows…a 5 year fixed rate can be had for 3.39% and in some cases, even 3.29%.   Does it make sense to refinance your mortgage and consolidate that car loan, student loan, credit card, line of credit or other debt?   The answer is an overwhelming YES!

 

Compounding interest rates are a killer.  If you have $20,000 or more in non-mortgaged debt, then you should consider consolidation.   Especially with today's record low interest rates.

 

Here's an example of one situation:

 

   Rate  Balance Pymnt
 Mortgage 3.99% $300,000 $1,349
 Car loan 6.00% $24,000 $563
 Credit Cards 18% $10,000 $300
 Line of credit 7% $10,000 $300
mortgage penalty   $2,993 $0
 Totals   $346,993 $2,512

 

And here's what the new situation could look like after consolidating their debts:

 

   Rate  Balance  Pymnt
 Mortgage 3.39% $346,993 $1,533
 Car loan   $0 $0
 Credit Cards   $0 $0
 Line of credit   $0 $0
mortgage penalty   $0 $0
 Totals   $346,993 $1,533

 

 

So in this example, we are reducing the monthly payment by $979.00.     Let's take some of that money and put it towards your new mortgage… if you took $500/mth and put this towards your mortgage for 5 years, you would reduce your amortization to 10 years and 7 months.   Clearly, this is worth breaking the mortgage and paying the penalty.

 

(keep in mind, the penalty could be higher if the lender uses an Interest Rate Differential to calculate the penalty… Always speak with your Mortgage Broker or feel free to contact myself);


Jeff Trounsell, BA, AMP
Mortgage Broker
CENTUM Pacific Mortgages Inc.
Cell: 778-960-1123
Fax: 778-800-9939
 
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