Mortgage question

[Lostsoul33]

Currently I have my mortgage with a bank in Canada. I have approximately 1 year left before it comes up for renewal. I really dislike this bank as I had a lot of trouble with them when I renewed my mortgage. Um..they made so many mistakes that all of my bank fees were lifted, I received gift certificates for dinner and paid less mortgage fees. They went in and took money out of my bank and that really made me mad. After that I was determined to switch my mortgage but was told to wait due to penalites. I spoke with my new banker today and I think I"m ready to switch my mortgage now. However, my knowledge when it comes to mortgages, prime rates and such is very limited. So please let me know what you think.
My mortgage right now is approximately 146,000. I do biweekly payments of $435.66
I am paying 4.9% in a fixed rate for another year. I am told by my banker that mortgage rates have went up 3 times in the past 6 weeks and they are expected to continue climbing.
He is offering me a 7 year fixed rate of 5.23% He is also going to give me the specs for a 5 year rate but he says that 7 year is popular with most.
The maximum penalty for switching my mortgage before it's up for renewal would be $948. Now what he's saying is that if the rates continue to climb as they are, when I renew in a year, I will end up paying that $948 plus much more. So what do you think? Will it save me money in the long run to switch this over right now? I know that nobody can predict exactly where the rates will be in a year but I'm just wondering what some of you think of this.

[Lostsoul33]

I was wrong about one thing here. I actually have just under 2 years left on my mortgage? No ideas?

[sweeps]

My first suggestion is to always avoid lenders who charge a penalty to prepay your mortgage. You should be able to pay as much as you want towards your mortgage without incurring fees.

My second suggestion is to make sure you shop around for rates at other lenders. I'm not familiar with mortgage rates in Canada, so I don't know if 5.23% on a 7/1 balloon is a good rate. Also you haven't mentioned what the closing costs will be. If this lender is charging $10,000 for closing costs, that is a lot more worrisome than a $948 prepayment penalty.

If you take the refinance offer, your new payment will be $804.41. If I've done my calculations correctly, it'll take about 14 months to make up for the prepayment penalty. That's not counting any closing costs. Once you factor those in, the deal isn't looking so good.

Of course the wild card is what you think mortgage rates will do. If you think they'll skyrocket, you may want to lock in now. But if you really think that will happen, you probably should be considering a 30-year fixed loan (with no prepay penalty of course).

[34saving]

Depending on how much you hate your bank, I'd stick it out for two more years. You're locked at a rate lower than you can get and most people think the rate hikes are coming to a close soon (at least here in the US -- not sure about Canada.) Also, a lot can change in two years in your own situation. Any chance you'll be moving?

[Lostsoul33]

I have no idea what the closing costs will be. That didn't even enter my mind.
I do really hate the bank but not to the point that I need to get out of there today. If I'm not going to gain anything by switching, then I will just stay put for another 2 years. As far as moving, nope not gonna do it unless something really unexpected happens.