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The bank doesn't "lose" in that they are fully paid up to the date of the refinance.
by patrickg_zill 10y ago
The bank doesn't "lose" in that they are fully paid up to the date of the refinance.
- kasey_junk 10y agoThe bank loses in that they are upside down on the spread. They have a mortgage which is paying a low interest rate but they have to borrow at a high one. The mortgage is essentially a 30 year option, in those terms it becomes obvious why 30 year fixed mortgages wouldn't exist in an unsubsidized market.
- patrickg_zill 10y agoYou have to take into account all time periods from the time the interest rate charges started (beginning of loan) through to the time when the bank's loan is terminated. They may have (potentially) had a few month's worth of being underwater but they were able to borrow at a lower rate also. Further, there are several %age points of spread between what banks pay to borrow and what the mortgage rate is, further cushioning them. See the CIDOR here: http://www.tradingeconomics.com/canada/interbank-rate http://www.tradingeconomics.com/canada/interbank-rate ... now compare with the mortgage rates a bank will charge. EDIT: CIDOR under 1% but ratehub.ca says the best 5-year fixed rate you can get is... 2.42% .