To refinance or not to refinance: That is the question among millions of homeowners. Interest rates are low, and might continue to be that way well into next year.
It might be difficult to project when rates might increase, as well as what that increase might represent. However, consumers may want to imagine the status of interest rates when the term of their mortgage is set to expire. Certainly, not even experts can predict what will happen over the next several years. Some of Canada’s projected rate increase activity may be tied to that of the U.S. Since our neighbours to the south are not experiencing anything resembling a strong economic recovery, U.S. interest rates may continue to be quite low.
It should also be considered that five-year, fixed-rate mortgages have never, in Canada’s history, been as low as they are right now. It is unlikely the rates will get lower, or will be matched, for many years.
By refinancing now, homeowners might be poised to save thousands of dollars on interest. Consumers may not always pay attention to interest rates, as well as the state of the mortgage market. Buying and trading stocks may command more attention, but minding one’s more mundane investments might yield significant savings. It can be fascinating to follow the ups and downs of one’s favorite stocks, but not so much fun in observing the amount of one’s debt.
Most people are in some level of debt, and their mortgages typically represent the majority of what they owe. However, that burden might be relieved by examining the type of mortgage currently held and considering those that are currently available. Homeowners should review all of their debts, not just their mortgages, and rank them on the basis of interest levels. Minimum payment should be analyzed for each type of debt.
The mortgage should be reviewed for not just the current interest rate and balance due, but for penalties that might be imposed if it is broken. The original mortgage agreement contains information on possible penalties. If the agreement’s language is confusing, an Accredited Mortgage Professional is available to look at the contract at no charge.
If there is little or no penalty, it is worthwhile to estimate savings that might be accrued over a period of years. A lower rate of interest can help homeowners start saving money as soon as the next payment, while they continue to build equity in their most important investment.