3 years ago, I got around 5.13% for 5 years.  I guess I should have analysed the market a bit better at the time, but when buying something as big as a house, you tend to play the caution card.  I liked 5.13 because it felt stable and low enough to survive whatever kind of upswing may have been coming.

Canada Mortgage Rates – August 2009

Considering 5.13% of the first five years of a $300,000 over 25 year mortgage and 5% down (real mortgage amount for $285,000 ) , the amount of interest paid in the first 3 years would have been $42,533.  The amount of principal would have been $18,223. Ouch.

FOR Year 1: Interest= $ 14486.16 Principal= $ 5766.70 Balance= $ 279233.30
FOR Year 2: Interest= $ 14183.28 Principal= $ 6069.59 Balance= $ 273163.70
FOR Year 3: Interest= $ 13864.48 Principal= $ 6388.39 Balance= $ 266775.31
FOR Year 4: Interest= $ 13528.94   Principal= $ 6723.93 Balance= $ 260051.38
FOR Year 5: Interest= $ 13175.77 Principal= $ 7077.09 Balance= $ 252974.29

If I were to bail out now of my existing home, and buy a new home of equivalent value, paying a low 2 year @ 3.59% the remaining 2 year would look like:

FOR Year 1 : Interest= $ 9467.47   Principal= $ 6713.93   Balance= $ 260061.07
FOR Years 2: Interest= $ 9222.43   Principal= $ 6958.97   Balance= $ 253102.10

Not too much difference here.  In fact, it would be more expensive by 127 dollars!!!  The reason is because the new 25-year term on a new home actually starts off after the first 3 years of the original 25-year term.

However, if we continue this new mortgage 5 years into the future, the other mortgage timeline would have been 8 years ahead (assuming a similar interest rate renewal for both):

New mortgage timeline 5 year mark:
FOR Year 5: Interest= $ 8432.35   Principal= $ 7749.05   Balance= $ 230663.90

Old mortgage timeline 8 year mark:
FOR Year 8: Interest= $ 12001.03   Principal= $ 8251.83   Balance= $ 229433.60

This means I will have been paid $1230 more on my outstanding by sticking with the original mortgage, however in this time of 8 years, I will have only paid 1348.45 per month on the new mortgage, while maintaining 1687.73 per month on the current mortgage.

This savings of 339.28 per month would mean a savings of 4071.00 in mortgage payments the first year, and 20,357.00 in mortgage payments for the 5 years that follow!  INCREDIBLE!!!

check out this amortization schedule calc at http://www.hsh.com/calc-amort.html

Pros and Cons of stepping into Another House at this Point

+ the value of a new home appreciate more quickly than the closing costs
+ more modern materials and building construction
+ no need to pay for new roof, new windows
+ more energy efficient home
+ mortgage payments lowered

- closing costs of new house

- cash downpayment required

- disruption in life

- possibly living in a new subdivision (dirty/pay for driveway/pay for fencing)

- need to repaint/redecorate a house