• Transcript of Video Blog:

    Hey, everybody. It’s Rowan Smith with the Mortgage Centre. What I want to talk to you about today is getting out of your existing variable rate that you may have got at a higher rate than is available today, getting into today’s lower rates. Let’s look at what happened.

    Back in 2008, with the fall of Lehman Brothers and a lot of the money in the capital markets seized up on us for a while there, our variable rate mortgages went from prime minus 0.9, or prime minus 90, to prime plus two percent in some cases.

    Now a lot of advocates, not myself, were still selling variable rate mortgages, claiming that variable was always better than fixed. At that particular point in time, it was unclear how long those premiums on top of prime rate were going to remain.

    But many people still took their variable rate mortgages, hoping to save money in the long haul, because that’s what they’ve been traditionally coached to do by either their financial planner or the media or what have you.

    But times have changed since back in 2008, and fast forward to today, what you’re seeing is back to prime minus 0.75 or prime minus 0.8. Not quite the full prime minus 0.9 that was available before, although it’s probably on the horizon.

    Now if you’re in one of those mortgage rates at prime plus, or maybe even if it’s just prime minus a quarter, that’s a full half percentage point difference. It’s worth looking into whether or not you should pay it out, eat the penalty, and get the new lower rates.

    Now you may say, I’ve heard these penalties are huge. It’s not necessarily the case. The reality is that variable rate mortgages are paid, your penalty is paid on a three month interest penalty. It’s never more than that.

    So if you’re looking at getting out of it, basically take whatever your payment is, and a rough number is to multiply that number by 2.6. That’ll give you just a ballpark calculation that you can use.
    If you look at that, now figure out what your savings would be on the remainder of your term. If it’s perhaps one, two, or even three percent lower than when you got that mortgage, there could be some staggering savings available to you.

    All you have to do is pick up the phone and give me a call. I’m happy to give you a free analysis and look at the situation and see if I can save you that money.

    For the Mortgage Centre, I’m Rowan Smith.

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