Comments on: Refinance a mortgage mid-term in Canada?

Question: Refinance a mortgage mid-term in Canada?

hylaride — Wed, 04 Feb 2009 05:22:36 -0800

What are the costs of refinancing your mortgage mid-term in Canada?

I'm about half-way through a 5 year mortgage. I'm in a closed term 5 year fixed rate mortgage at 5.84%. The financial crisis has pushed variable rate mortgages down to to as low as 3.5%, though fixed rates for 5 year terms are not much lower than mine. Going variable could save me $4-5000/year.

Still, I'm interested in refinancing anyways. Other than the discharge fee of $200 at my company (that a new mortgage company will often pay for), what are the costs of switching mid-term in Ontario, Canada?

By: weapons-grade pandemonium

weapons-grade pandemonium — Wed, 04 Feb 2009 06:24:47 -0800

Don't just go with the book rates. You can haggle with banks. Meet with a few loans officers, and tell them you're talking with competitors. Switching to Scotiabank saved me a lot of money.

By: chunking express

chunking express — Wed, 04 Feb 2009 07:33:13 -0800

I think variable rate mortgages generally perform better than fixed. My rate is prime minus 0.85%, which I got two years back. Now I think rates are prime plus a little bit, which is still not very much now.

By: Pomo

Pomo — Wed, 04 Feb 2009 09:13:38 -0800

It's not just the discharge fee that you'll have to pay (which is usually only $75)...there will almost certainly also be penalties for pre-paying your mortgage mid-way through a term. A "closed" mortgage is just that: closed to pre-payment. Check your Standard Mortgage Terms and/or Disclosure Statement that you would have received from the bank upon signing. The details of the penalty will be in those documents.

Furthermore, if you are going to be refinancing (paying out this mortgage in order to take on another one with the same or a different bank), you will have to pay the associated legal costs all over again, since an entirely new mortgage will be registered against the title.

It might still be worth it, for a much lower interest rate, but definitely crunch the numbers first.