# How to calculate the true cost of borrowing (mortagage) over the first 5 years?



## Shaitan00 (Jun 16, 2015)

I currently have a mortgage of $360,000 (30 years) at 2.6% signed for 5 years and it has been 6 months (so 4.5 years left)
A new bank is offering me a rate of 2.5% but I need to pay a penalty of $2,000 to the first bank to transfer it over (blended into my mortage).

So I am trying to calculate the COST of borrowing for each case so that I can see if I save more then $2,000 or not (to see if it is worth it).
Does anyone know the calculations needed to do this? Or have an online calculator I can use?

Thanks,


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## nobleea (Oct 11, 2013)

Shaitan00 said:


> I currently have a mortgage of $360,000 (30 years) at 2.6% signed for 5 years and it has been 6 months (so 4.5 years left)
> A new bank is offering me a rate of 2.5% but I need to pay a penalty of $2,000 to the first bank to transfer it over (blended into my mortage).
> 
> So I am trying to calculate the COST of borrowing for each case so that I can see if I save more then $2,000 or not (to see if it is worth it).
> ...


Just google amortization calculator. Something like this:
http://www.canadamortgage.com/calculators/amortization.cgi
Look at the end of term balance and compare between the two.
For a 0.1% difference, I highly doubt you're going to come out ahead by paying the break fee.
Just ran the numbers, you'd be paying $2000 to save something like $600.


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## Woz (Sep 5, 2013)

You can calculate it in excel. If you transferred your mortgage and kept your mortgage payments the same as they are now you'd be left owing $646.40 more after 4.5 years.

Work below

Your current mortgage payments are: PMT((1+2.6%/2)^(1/6)-1,30*12,-$360000) = $1,438.59
Currently (6 months in) your mortgage is: FV((1+2.6%/2)^(1/6)-1, 0.5*12, $1438.59, -$360000) = $356,001.83
After 4.5 more years your mortgage is: FV((1+2.6%/2)^(1/6)-1, 5*12, $1438.59, -$360000) = $317,596.38

If you move your $356k mortgage plus $2k bundled in with the same 29.5 year remaining amortization.

After 4.5 years your mortgage is: FV((1+2.5%/2)^(1/6)-1, 4.5*12, $1438.59,-$358001.83) = $318,242.78

$318,242.78 - $317,596.38 = $646.40


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## janus10 (Nov 7, 2013)

There is a thread in the General Forum for Excel based calculators. This would help you: http://canadianmoneyforum.com/files...ing vs. Variable Rate Mortgage Calculator.xls

You just need to fix the variable rate by putting in the same rate each year.


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## heyjude (May 16, 2009)

Here's another calculator that might be helpful.

http://www.ratehub.ca/mortgage-refinance-calculator


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## Cal (Jun 17, 2009)

nobleea said:


> Just ran the numbers, you'd be paying $2000 to save something like $600.


Good to know when negotiating, this way you can tell them what rate they need to give you to at least get your attention about switching lenders....


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