Originally posted by uzless
You currently have a $200,000 mortgage with 2 years left on your 5 year fixed rate mortgage at 5.3%. You are in year 18 of a 20 year ammortization.
You are considering breaking your mortgage and refinancing at the currently lower rate. The current 5 year rate is 3.7%
Your bank will charge you a penalty if you break your mortgage however.
You could ...[text shortened]... hat is the maximum amount of penalty charge that you still save money by breaking your mortgage?
Just to clarify:
1. Was the original mortgage for $200,000 total, or is there $200,000 remaining on the mortgage at this point? If the original mortgage was for $200,000, I'll assume the interest rate was always 5.3% for simplicity.
2. Was the original amortization period for 20 years, and you're now extending the total amortization period by 5 years (with the new mortgage lasting 7 years from the 18-year mark given), or was the amortization period always 25 years? If it was originally for 20 years, the mortgage will be paid off if you continue for 2 more years so there's no need to re-mortgage at 3.7%.