Callum Greig
Licensed Mortgage Professional
& team
Experience Counts!

Mortgage Refinancing

With interest rates falling as of late, refinancing your existing mortgage and switching to a lower rate may save you a lot of money — possibly thousands of dollars per year.

Imagine what you could do with the savings: anything from renovating or investing to going on a much-needed vacation or putting money towards your children’s education.

Perhaps your home is financed through a first and second mortgage. If so, reviewing your options to combine the two could also result in having more money left over at the end of each month.

With the high cost of credit card rates and fees, this may also be the perfect opportunity to a fresh start by refinancing your mortgage and freeing up some money to pay off high-interest credit card debt. With access to more money, you will be better able to manage your debt.

By refinancing now and paying off your debt, you can put yourself and your family in a better financial position. It’s very important to not rack up your credit cards after refinancing, however, so set your goals and budgets, and stick to them.

What To Keep In Mind

There are penalties for paying out your existing mortgage loan prior to renewal, but these may be offset by the extra money you could acquire through a refinance.

Also keep in mind that by refinancing you may extend the time it will take to pay off your mortgage. That said, there are many ways to pay down your mortgage sooner to save you thousands of dollars. Most mortgage products, for instance, include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) per calendar year. This will also help reduce your amortization period (the length of your mortgage), which, in turn, saves you money.

You can also change the way you make your payments by opting for accelerated bi-weekly mortgage payments. Not to be confused with semi-monthly mortgage payments (24 payments per year), accelerated bi-weekly mortgage payments (26 payments per year) will not only pay your mortgage off quicker, but it’s guaranteed to save you a significant amount of money over the term of your mortgage.

If, for instance, you have a $100,000 mortgage, an interest rate of 5% and an amortization period of 25 years, your monthly mortgage payment would be $581.60 and your total payments for a year would be $6,979.20 ($581.60 x 12).

To understand the savings accelerated bi-weekly mortgage payments can make, take the monthly mortgage payment of $581.60 and divide it by two ($581.60 ÷ 2 = $290.80). Next, take that payment and multiple it by 26 to arrive at your total payments for the year ($290.80 x 26 = $7,560.80).

As you can see, by using the monthly mortgage payment plan, you’ve made payments totalling $6,979.20 for the year, while using the accelerated bi-weekly mortgage plan you’ve made payments totalling $7,560.80 — a difference of $581.60.

Basically, with accelerated bi-weekly mortgage payments, you’re making one additional monthly payment per year.

Using this example, you would reduce the amortization on your $100,000 mortgage from 25 years to just over 21 years and your total savings on interest over the life of the mortgage would be just over $12,000.

As always, if you want to talk about your refinancing options with a professional mortgage broker, we're here to help.

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