If you have a mortgage, you have a mortgage term. This is the date that your mortgage comes up for renewal and you have to renegotiate your terms, rates, bank, etc. Everyone for the past 5 years has been winning in this renewal scenario because rates are usually much less than what you signed up at 1-5 years ago.
If you are now searching for your mortgage document to see when your renewal is, I have good news for you. You can EARLY renew!Thatâ€™s right, you do not need to wait for the magical renewal day to take advantage of todayâ€™s crazy low interest rates.
If you donâ€™t think that you have enough equity in your home to refinance, once again I have good news. This is not a refinance, it is purely a switch/transfer. That means no new money is coming out, you are simply taking your current mortgage and switching it over to a different bank with the same amount but at their new rates.
Whatâ€™s the catch?Â Payout penalties.They can be a deal breaker in some scenarios and not make it worth while, but in a lot of cases recently it is definitely worth it despite the penalty. Let me show you with my own mortgage.
My Personal Example
I often work so hard making sure that my clients are taken care of that I neglect my own mortgage. Ironic, I know…This was the case until recently. I have been in my mortgage for 3 years and am in a 5 year fixed. I had a 3.19% 5 year fixed closed mortgage, which was the best rate at that time. I locked in thinking there is no way rates could go any lowerâ€¦.they dropped the following yearâ€¦and they continued to drop to where we are today.
I then called my bank and got a penalty quote for $4,600. Yikes!
I ran the numbers only comparing the savings I will receive in the next two years alone (my remaining term). I also ran what they could be over the 5 years if I took advantage of rates now and the savings were even more dramatic. Once again I went back to looking at just the next 2 years on whether I should wait for the actually renewal day or switching out 2 years left. In monthly payment savings (principle and interest) and my balance outstanding at the end of the 24 months, I will have saved $7,720! WHOA! Now I am interested!!
$7,720 of savings in two years â€“ 4,600 penalty â€“ $3,120 net savings in the next 2 years alone. I obviously pressed submit on my mortgage immediately and sent it offÂ to the banks.
If you have interest rates above 3% it is worth looking into. Penalties will make a difference if it is worth it, your mortgage amount does, and what type of mortgage product you take on the new mortgage. All of these are factors, but maybe worth considering if you can save $1,560/year!
If you would like me to look into your personal renewal situation send me an email at email@example.com
There is NO/ZERO/ZIP pressure to act on renewing or refinancing, because this is your home, your mortgage, your finances. Even if you know that you will for sure not do it, but are just curious on your potential savings you can call or email me. I would be happy to run some hypothetical scenarios so you can see what is possible. I just saved a ton a cash by doing nothing but changing products, and therefore wanted to let me community know what is possible.
Thanks for reading!
P.s. I recommend taking the savings you earn from the new mortgage and putting it back on the mortgage so it is like your payments never dropped. Do this and bi-weekly accelerated you will knock off 5 years of your overall mortgage life. BOOM. Take that debt!!