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Originally Posted by Iggy_12
My current rate is 2.34 I locked into a 5 year fixed that is set to renew in April 2025. Feel like I am right in the middle so I am looking for advice. Do i sign a variable mortgage and wait for rates to come down even more as predicted by the end of 2025 then switch over to a fixed when it gets somewhat close to my current rate?
All this stuff seems pretty confusing. To add to the confusion like Erik, i am going through a separation, i had been pre approved to take over the mortgage myself, is it as simple as just assuming the remaining portion of the mortgage or do i do nothing until April? I have a separation agreement from the lawyers, do I just take that to my bank get approved and mortgage doesnt change until its time for renewal in April?
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I feel like fixed will be an easy answer for April 2025 renewal. I'm not sure how much of the anticipated rate drops are locked in by April 2025 and how much further it has to go from April until a next renewal. You'd want to redo the calculation and compare with the projections at that time. It's not like right now where we're looking at almost 2%, but we're expecting maybe 0.5% of that (25%) to happen by calendar year end.
When I did the napkin math for my situation (renewal before calendar year end), it started feeling like lenders were just making it seem like I had a choice. In reality, the models they used to post the current fixed and variable rate differences of 0.8-1.2% higher initially kinda project to end up relatively negligible by the end of a 3 year term. I'll pay probably on average 1% more than fixed for the front 18 months and then I have to hope I'm getting more than 1% savings on the back half 18 months of the 3 year term.
Keep in mind, you can't do this calculation using historical info. The last 3-5 years have had some crazy unanticipated fluctuations in the interest rates.
I'm anticipating an absolute worst case scenario where I may end up paying $3-5K more in interest on fixed over that 3 years on a $400K ish mortgage. That's $1-1.5K a year average, but it comes with certainty. It's not the end of the world if this is the end result. I get crushed worse than that in the stock market on a bad year. I'm optimistic a real difference would be less than that though, maybe like $500 a year average. I'm not going to bother doing that calculation once my 3 year terms is over.
Your call on what you want to do. Sorry to hear you're going through a separation. If it were me, I'd do fixed solely because I assume I'd have a lot on my mind that I'd rather address over that 3 years rather than have to be aware of mortgage rates over those same 3 years.
Unless there's a requirement to do so, (ie: they demand it) I think you can also just wait till renewal to remove your spouse's name off the mortgage. It doesn't hurt to just email your lender and ask what they recommend and what info/docs are required.