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Here is an interesting article written by;
Patricia Lovett-Reid
Senior Vice President TD Waterhouse
Should you refinance your mortgage?
With interest rates low, Canadians are thinking about refinancing their mortgages. Here’s how to tell if it’s worth it.
I know I’m an optimist, but I can’t help thinking that there is a silver lining around this cloud of bad news.
Equity markets are see-sawing back and forth and yet there is an opportunity to build wealth in a low interest rate environment.
Where do interest rates touch most Canadians? Our mortgages. As rates have inched lower and lower, refinancing your existing mortgage becomes more and more appealing. Typically, the decision rests on the trade-off between how much it will cost to break out of the current mortgage and how much you would save in interest payments going forward.
Let us discuss an example where there is $100,000 outstanding on a locked-in fixed rate mortgage set up in January 2008 at six per cent for a five-year term. With 45 months still remaining on the term and posted rates for four-year fixed rate mortgages now at 4.4 per cent seems like a savings of 1.6 per cent! Read the rest of this entry »