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Originally Posted by blankall
That's a pretty good calculation there considering you have no idea what the actual interest owing is and the principle of the remaining mortgage.
Under some circumstances he will save by simply breaking the morgage. Depends on the rate he can get and how much is left on the mortgate.
My girlfrien's parents were paying 3.9% with 2 years left. They had 400k left on the mortgage, and were able to get a 2.99% fixed 5 year. I advised them to pay the penalty and pay the fee, as in this case it was a no brainer.
Whether or not you should pay the penalty should be based on a calculation dependent on your specific situation.
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It's pretty easy to figure out.
The bank takes your current rate and charges you an IRD penalty based on their best rate of their choice. They'll then figure out what they need to mark up their "current" rate to make it even. They'll then give you that rate for 5 years instead of your current rate for (I think he said 3) more years essentially selling you on the two extra years at low rates. Problem is that if you're sitting down with your bank your likely not getting a best current rate. So you're screwed from the get go. You're paying a penalty to break your mortgage (even though your bank seems to tell you you're not, they'll sell you on blend and extend and a blended rate. The rate is blended, but so is your penalty ontop of that via a higher rate. You're paying them one way or another. It's just if after all that you then go and get the best rate or a poorer rate they're offering you.
I love the condescension, blathering away about making comments without even knowing the current actual interest owing, principal, when you follow up with this gem
Quote:
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Originally Posted by blankall
The issue is that he is already locked in for 3 more years. He can't get the 2.99 rate or the 10 year deal without paying about $6000 to break his current mortgage.
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Not to mention you then follow up with a comment about your girlfriends parents and how you heroically suggested they do the EXACT same thing most of us suggested the guy asking the questions should consider.
Finally I then wrapped up my comments suggesting the poster do the math on the three scenarios to figure out which one works best and even offered to help.
Not once did the poster ask about variable rates which are a completely different discussion. Some people simply don't like the worrying about rates.
The variable rate debate is in favour of variable until it's not. Pretty poor answer but at some point the history of variable beating fixed 99% of the time will result in the 1% happening. I'd wager the chance of that 1% right now is a lot higher than ever in the past. You could still very easily win out on variable over fixed right now. But I'm less comfortable betting on in now that I would have been 2 years ago.
Then there's stacey, WTF is he talking about.
Poster asked about locking a rate at 3.90%, for 5 years (so 2012 - 2017) hulk suggests consider getting 2.99% for five years (so 2012 - 2017) and paying the penalty and stacey goes off that 3.90% is a great rate to get for 5 years, 2.99% isn't going to last forever (which is totally irrelevant), you can't predict rates mr HulkRogan "just leave it at "I can't predict rates"" and the poster should take the 3.90% because of. . . . Chat to those people from the 80's??
How does that even make sense?
Was yesterday afternoon a full moon or something ??
What's with people just being jerks?