Cannect has reintroduced our successful Mortgage Penalty Reduction Plan to assist Canadians in taking advantage of recent changes in mortgage rates.
“We will be helping qualified Canadians save up to 25% on their mortgage prepayment penalties” said Cannect Home Finance President, Marcus Tzaferis.
Almost every mortgage loan in Canada includes a “prepayment privilege” allowing the borrower to pay off a portion of their mortgage loan without incurring prepayment penalties. Prepayment penalties exist so the bank can recover some of the interest that they will lose when a borrower decides to refinance. Since few borrowers have the resources to make a lump sum payment like this, few pay attention to the prepayment privilege and the significant savings that it can lead to in a refinancing.
Lisa and Ashley have identical mortgages with $500,000 principal balances at 4.5% interest with three years left until maturity. Lisa negotiates a refinancing with her bank on her entire balance and has to pay a prepayment penalty of $30,000. Meanwhile, Ashley borrows $100,000 from Cannect so she can prepay 20% of her mortgage balance without penalty before she refinances. Ashley’s penalty is only $24,000, saving her $6,000 (reduced slightly by her short-term borrowing costs). Ashley can use these savings to reduce the principal of her loan and reduce her monthly payment.
Each bank has their own rules regarding prepayments and penalties so it’s wise to ask for our help with this strategy. “We know mortgages inside and out,” says Mr. Tzaferis. “Our Penalty Reduction Plan positions us to help you to get the best possible terms on a refinancing.”
If you want to check your mortgage penalty now, visit breakyourmortgage.ca. Here, consumers can easily calculate the penalty to break their existing mortgage as well as the savings available to them, should they decide to switch.
This is not the only innovative solution Cannect has created to help its customers. Cannect also offers second mortgages as well as lines of credit behind first mortgages to help Canadians access the lowest market rates when they are refinancing.
Refinancing your mortgage is already complicated enough, given the new rules introduced by the Federal Government that are favourable to the banks. If you have considerable equity in your home and are looking to refinance your mortgage, you will usually have to pay a rate premium of 0.30% in order to get a loan amount higher than the exact amount owing on your existing mortgage. For virtually every one of us with prepayment penalties that is a significant disadvantage.
Cannect has found a way to mitigate the effect of these new rules by offering the consumer a mortgage penalty payment plan. You have access to the best variable rate mortgage now, then pay your mortgage penalty the next time you renegotiate your mortgage, or in installments over the term of your new lower interest rate mortgage.
