When to refinance?

This is a tough question.  There are all sorts of important things to factor in.  Penalties, timelines to sell, cash flows, lack thereof, etc.  I think I have found a way to simplify things.

Recently, by reviewing my portfolio, and working on my business, not in my business, I have made a number of observations.  A large number of mortgages are between 1.25% to 2.5% higher than today's rates.  That means on a mortgage of $100,000 I am paying an extra $142.26 per month or  $1,707.12 per year. 

Want to really blow your mind ... as much as financing can do that -

A mortgage at
2.25% - Mortgage reduction over 5 years $9,961.83
4.75% - Mortgage reduction over 5 years $6,342.98
*** think about that for a moment, you pay $142,26 per month less and you make $60.31 more in principle reduction payments.  That is a great double dip.

Going a step further, the total savings over 5 years with a 2.25% rate versus a 4.75% rate is $12,154.45

So the next problem is the penalty.  Here is an interesting fact for you, if you stay with the same lender, there is no penalty if you are refinancing for a larger amount.  So, when I do the refinance, I will not being paying any penalties.

Normally, your penalty is three months interest, so on $100,000 mortgage, the three month penalty would be $1000, which over the five year term would be $16.67 per month.  If you are increasing your cash flow by $142.26, the $16.67 penalty means you are still net ahead $125.59 per month.

I am now considering the implications of refinancing 9 to 11 properties and freeing up some equity and actually lowering my monthly payments.

Take a look at your portfolio, if you are paying over 3% right now for your investment properties mortgage, you might want to consider contacting Lilianne Eid at TD Canada Trust to consider refinancing -

Spend the time working on your business not in your business and you will see much greater returns.