what is “resigning a mortgage?”

178 viewsEconomicsOther

I read a comment on a post about high rent that said that, “[they probably] bought a $550,000 house with a built in basement suite to help cover [their] 2.1% mortgage 4 years ago and [they] just had to resign at 6.8%”.

Please what renewing or resigning means in this context. I’ve never bought a house and I barely know about mortgages from movies. TIA!

In: Economics

7 Answers

Anonymous 0 Comments

[removed]

Anonymous 0 Comments

Resign is not like quitting. It’s signing for a new mortgage.

Is it possible they took on a very short-term loan I got the low interest payments but each monthly payment was really high. maybe they swapped out for a 30-year loan or something with a higher interest rate

Anonymous 0 Comments

It sounds like op is talking about someone buying a property with a basement suite and using the rent from that to pay their mortgage.

Why if they bought at 2.1% they would have to refinance at 6.8% is confusing me.

Anonymous 0 Comments

They could be Canadian, in which case unlike American mortgages which allow you to lock your rate for the entire duration of the loan, Canadian mortgages are typically ARM style, where the rates are readjusted every 5 years

Anonymous 0 Comments

I presume they mean “re-signing”, rather than “resign-ing”.

When you take out a mortgage on a property you borrow money over a specific length of time, say 25 years. The interest you pay each month will be based on either a variable rate – based on the national interest rate, going up or down each month with that – or a fixed rate – based on a specific interest rate determined at the time you took out the mortgage. You will normally agree to your fixed rate for a specific length of time too, but shorter than your overall mortgage, usually 2-10 years. At the end of that time, you either go onto the standard rate (usually a lot), or get a new deal.

People who got fixed rates when interest rates were low are now getting to the end of those fixed rate terms and are moving onto more expensive rates because interest rates are much higher now.

This is how it works in the UK, but might be different in other countries.

Anonymous 0 Comments

That’s not a thing. When you sign a mortgage agreement that’s it, the only thing that can change is the interest rate if it’s a “variable rate” mortgage but those are rare these days. Mortgages are agreements basically written in stone.

It sounds like maybe they had a 2.1% variable rate loan that ballooned up to something ridiculous and had to refinance a new mortgage at current market rates which would be around 6.8%. Still better than paying 12% or whatever they got fucked on with the variable rate. But they had to have seen it coming, it’s in the contract.

I actually had a pretty low variable rate loan when I bought my house in 2004 but I had a good finance guy and he made sure there was a clause that it could only go up so much per year. But by 2019 it finally got up to a little over 5% so I refi’ed at 3.625% (should have waited a few more months to get below 3% but it is what it is), and that’s a 30 year fixed rate. It will *NOT* change unless I refinance (I would never do that unless it dropped into the 2% range) or the apocalypse happens.

I don’t know what “re-signing” means but refinancing is definitely a thing. It just means you’re not happy with your current loan so you get a better one. A mortgage is a product, if you don’t like it then you try to get a better one depending on whether the loan market has what you want available. Right now low interest mortgages are extremely hard to come by (lack of supply) but lots of people want them (high demand). That wasn’t the case 5 years ago. It’s cyclical.

Anonymous 0 Comments

This is probably a case of Americans being blind to how the rest of the world operates in terms of mortgages. The US is fairly unique in having fixed rate 30-year mortgages (or even 15-year ones). The Federal government subsidizes this through certain Government corporations, including Fannie Mae, Freddie Mac, and Ginnie Mae.

The rest of the world still calculates the payments on a 30-year basis, but resets the interest rate every 5 years or so.