If you’ve got an existing mortgage, but want to either refinance it for a lower rate, or lock in the current rates for a longer period of time, here is a very simple strategy that will allow you to play the market for the next 4 months while keeping all your options open.
The biggest reason that people don’t refinance when interest rates are lower is due to the interest penalty they will have to pay to get out of their current higher interest rate mortgage term.
The prepayment penalty can be worth paying if the mortgage rates go up and stay up for the foreseeable future.
But how does anyone know what the mortgage rates are actually going to do? Even for the experts, their opinions are only educated guesses as there are too many global economic forces that can influence our capital markets at any one time.
So one way of being able to potentially have your cake and eat it too is to apply for a mortgage pre-approval right now and get a long term interest rate of your choosing locked in for 120 days.
The pre-approval doesn’t commit you to act in any way, and if rates go down, you can also take advantage of positive rate moves.
But if rates do go up during the 120 day period, two interesting things will happen. First, you have the old rate locked in for your use if you so choose and second, the prepayment penalty, which is likely going to be based on an interest differential calculation, will become lower as the rates go higher.
So by “playing the field” so to speak with a pre-approved mortgage that provides interest rate protection for 120 days, you can take more of a wait and see approach for the next 4 months to determine if any rate movements that may occur can work in your favor.
If you’re considering refinancing your existing mortgage to gain a lower interest rate, extend your interest term, consolidate debt, or all of the above, then I suggest that you give me a call so we can get you pre-approved for a new mortgage and get a current interest rate locked in for the next 120 days.
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel