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.
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.
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