How an early renewal could save you thousands

How an early renewal could save you thousands!

by Katie Whyte, Cam Collingwood & Brie Robertson, Mortgage Brokers
[email protected]  |  www.illuminatemortgages.ca
October 2020

Is your mortgage locked in a high-interest rate right now? Maybe you’re at 2.8%, 2.9% or even over 3%? If so, you’ve probably been seeing today’s low rates and have been thinking “Wow! I wish my renewal was now so I could save some money!” Well, you’re in luck! We’ve been helping people just like you renew their mortgages early and save THOUSANDS in interest…without paying a cent out of pocket.

If your mortgage is currently at 2.59% or higher - you could likely save money with an early renewal!

Let us show you how it works…

Let’s say you have $400,000 owing on your mortgage today and 3 years left on your 5-year fixed term. You’re locked in at a rate of 2.79% - which was a great rate at the time! You called your current lender and they’ve told you the penalty to renew early is $10,200…ouch.

If this was you, you’d probably stop there and think “nah, it’s not worth it.” BUT - we have a solution that has worked for many of our clients! We have a couple of lenders who are offering 1%, 2% or 3% cashback on a mortgage renewal or new purchase. The cashback you receive on this product never has to be paid back as long as you finish your 5-year term, and the interest rates are amazing.

You can use this cash-back for anything you want - including paying off that pesky penalty. So, how does that work? Let’s continue the situation we were talking about before:
On your $400,000 mortgage, with the 3% cashback product - you could get $12,000 cashback. Take $10,200 out of that to pay off the penalty at your current lender and you would get $1,800 cash in your pocket to renew early.
On top of that, your interest rate would drop from 2.79% to 2.49% with the 3% cashback. At your old 2.79% rate, you’d be paying around $31,735 in interest over the last 3 years of your term. By renewing early at 2.49%, over those same 3 years you’d only pay $28,295 interest, plus keep your low rate for another 2 years. That’s a savings of $3,440 in interest in the next 3 years!
On top of the interest savings, your payment would go down $60 each month and more of your payment would go to your principal, so you’d owe $1,300 less after those 3 years of payments. That brings your total savings up to $4,740 with an additional $1,800 in cash in your pocket.

Another option would be adding up to $3,000 of the penalty into your mortgage, so more of the cashback goes directly to you. In this example, you could add $3,000 of the penalty into the mortgage and instead of the $1,800 in cash back at closing, you could get $4800 in your pocket…plus saving money each month.

Obviously, everyone's situation is different as each mortgage is different. However, we have had several clients in the past couple of months who have saved themselves much more than this by using this strategy! We’d love to run these numbers for you to see how much money you could save by renewing early - email us at [email protected] to get started.

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