Prepay mortgage to lower IRD penalty ???

[drpeprchick]

I have a question for some professionals.

Here's the scenerio...I have a 5.89% mortgage with 2 1/2 years left...my penalty to break is app. $15,000. I know I can save with a new mortgage at 3.8%.

My question is would it be worth it for me to borrow some money (short term loan) to put against the mortgage to lower the penalty?

I appreciate any insight...

[LWNTHK]

I have a question for some professionals.

Here's the scenerio...I have a 5.89% mortgage with 2 1/2 years left...my penalty to break is app. $15,000. I know I can save with a new mortgage at 3.8%.

My question is would it be worth it for me to borrow some money (short term loan) to put against the mortgage to lower the penalty?

I appreciate any insight...

I think it worth of trying it if you can get LOC without any problem/trouble. First of all, I am not professional. I just have done it.
You can pay down your mortgage in order to lower your penalty. I am with BMO and I can pay down up to 20 % of the ORIGINAL mortgage amount and so I did. In my case, I save $487 penalty for $195k original mortgage by paying down $ 39k for 5% rate (3 months interest as penalty). I transferred $39k from HELOC to pay down my mortgage. The interest costs for $ 39k for few days around $ 30.

[CNeufeld]

With RBC, they took that into account when calculating the penalty. Don't know if this helps you or not...

Clint

[Samwfive]

What they said...

It's a good idea ONLY IF you have the spare from LOC(prime+1 type). Just remember to adjust(lower) your mortgage payment proportionately cuz now you need to pay the LOC as well....

Pointing out the obvious...exercising X% of lumpsum reduces the same % of the penalty.