Got a Variable Mortgage? Now’s the Time to Refinance

If you have a variable rate mortgage that you acquired between 2015 and 2017, you’re likely paying a higher rate of interest than you should. That’s because the discount rate on such mortgages has increased significantly in recent months.

Variable-rate mortgages opened between 2015 and 2017 likely have an interest rate discount (compared to the prime rate) of -0.20 to -0.60, depending on which lender prepared your mortgage. On the other hand, a variable rate mortgage “opened” today could carry a discount of as much as -0.95. That’s why you should consider redoing your variable mortgage immediately before the discount drops again.

The cost of refinancing

Even if you have to pay a penalty to refinance, the money you save on your reduced interest rate can more than make up for this extra expense in the long term.

For example, a $200,000 mortgage may charge a penalty of $1,500 when you refinance, but if your new mortgage reduces your interest payments by $200 per month, you’ll make up for the penalty in less than eight months.

Do your homework

Before you rush out to the nearest mortgage broker, it’s important to realize that not all lenders will give you the same kind of deal on your refinance. For one thing, the prime rate varies from one bank to another. That makes sense when you consider that the prime rate is simply the lowest possible rate at which a bank will consider lending money to its best customers. Some banks are more conservative than others when setting this rate, which can mean you’d be paying significantly more every month in interest than if you’d chosen a more liberal lender.

Even worse, some mortgage brokers will resort to deceptive advertising to bring in new clients. For example, a mortgage broker may advertise a much higher discount than other brokers are willing to offer but will base this discount on a much higher initial rate. As a result, your “discounted” variable mortgage could end up being far more expensive than a variable mortgage opened with an honest mortgage broker.

A smart financial move

If the rate on your variable mortgage is currently prime – 0.60 or less, refinancing your mortgage is a smart financial move. Our experienced mortgage brokers can match you up with a lender who will give you the best possible deal, but you’ll need to move quickly to take advantage of the current highly discounted rates.

Ready to see if your variable mortgage needs a refinance?

At Rasha Ingratta & Mortgage Associates, we offer deep insights to help our customers pick mortgage solutions that satisfy their lifestyle needs and economic circumstances. Talk to us now!

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