Gord McCallum of First Foundation Mortgages forwarded me an article from the Globe and Mail last week that talked about the pro's and con's of renegotiating your mortgage.
Why would you consider renogiating? Well, mortgage rates have come down significantly, and if your current rate is over 5% there is the potential to save a fair bit of money.
Many people shy away from renegotiating because they don't want to face any penalties, which, according to the article in the Globe and Mail, are on the rise. But often the math works out and paying the penalty is worth it.
Gord McCallum wrote to me: "with the economic slowdown a lot of people are trying to save money…on staples like groceries, heating bills, car maintenance, and other things. While saving money on everyday items is a worthy goal, a lot of people ignore the biggest and potentially most substantial place they can save money – their mortgage. My advice to people would be not to let the fear of a penalty get in your way, because even with a penalty you will likely save a lot of money at today's rates."
Another option is to blend and extend your mortgage, which often means you won't pay a penalty at all (although the savings won't be as high). Personally, I think the blend and extend option could be a great way to go; mortgage rates will increase again once the economy picks up, and if your term ends once rates are on the rise you could face an payment increase. By blending and extending you can lengthen the time you benefit from the lower rate.
All in all, it couldn't hurt to give your mortgage broker a call and find out exactly what your options are - it could end up saving you a lot of money!
Like Mr. Peter Schiff has stated many a time, prices have to collapse so people can afford these home, and not with exotic or creative financing.
One of the challenges facing President Obama in dealing with the struggling housing market is going to be tackling the staggering number of foreclosures on the market.
In the Financial Stability Plan, introduced today by Treasury Secretary Timothy Geithner, the government is proposing spending $50 billion on foreclosure prevention programs (see Inman News story). And while this may help stem the tide of future foreclosures it won’t help those homeowners who have already lost their homes.
Also contained in the package are a $15,000 tax credit and the lure of 4.5% mortgage, which may stimulate some home buying activity once the bill is signed into law, but until some of that inventory is absorbed any return to a more “normal” real estate market remains in question.
My advice is to lock in your rates for as long as possible… they might go down a bit further, but over the next few years, interest rates will shoot up, due to a devalued dollar.
If everyone could afford a house, my friend, there would be no tree left in the forest, do you know what I mean?
Everyone should afford a Porshe too, right?
I renegotiated mine. Saved $700 per month. Softens the blow from losing so much equity. My brand new house now costs more in Saskatoon, Regina, and is the same price in Winnipeg for petes sake! Does anyone actually look at what their homes cost in other cities, instead of looking at “average” price? Edmonton is getting cheap for middle class homes. Still up there for starter though.. but not far from other cities that pay a lot less. Where else can you get a brand new 2200sqft house for 400k and make so much? And now with cheap interest, much more affordable.
where can you find 2200 sq ft house for 400 k?? you’re getting me excited – for 400 k, i’m seeing max 1800 – 1900 sq ft!! please advise
you’ll be able to find a 2200 sq ft house for 400k in Edmonton within the next few years.
NE edmonton for sure. Jayman is blowing them out like crazy all over the city. Pretty sad really. Costs more in even Winnipeg for the same new house. This place is truly going down the tubes… but of course nobody thinks elsewhere will go down, just here… and we have more going on and pay more? perceptions here suck. if everybody thinks it is going down here, what about elsewhere?