Mortgage rates hit all-time lows….it all adds up to record savings too.

Mortgage rates are still low… In fact, they are at record lows…  5 year fixed rates for qualify products can be found at 2.89%… some No Frills products are at 2.79% (stay away from these products)..   Put another way, for every $100,000 of mortgage you borrower, your payment is $468/mth.

Compare this with the average 5 year fixed rate for the past 25 years being over 7.00% and you have huge potential savings.  That same $100,000 mortgage would cost you $700/mth… That’s a $232/mth difference.  No wonder more Canadians are buying homes, buying rental properties or tapping into their equity to invest.

Smart borrowing doesn’t mean you borrow as much as possible… it means you borrow wisely, with a purpose… Several of my clients borrowed to invest in Florida real estate over the past few years…  This proved to be a wise decision… One client paid $230k for a 2500 sq ft house… it’s now worth $330k… another bought a highrise condo for $220k…it’s now worth $290k…  This is good borrowing.

Then there’s the local investors that bought a house to rent… Mortgage payment is $1076/mth, taxes are $300/mth.. rents are $1670/mth on this townhouse. Purchase price was $320k in Dec 2010.. Today it’s worth $410k…   That price increase was a bit of luck, but the carrying costs add up to a small profit.. and like any real estate investment, it’s going to be held for at least 7 years.  The positive cashflow makes this an easy investment choice…all mainly due to the low interest rates..

How about another client that refinanced their mortgage… $240k and a $1167/mth payment… added in $40k in other debts with a $620/mth in payments…  We refinanced into a $280k mortgage with a payment of $1309/mth payment.. a monthly cashflow improvement of $478/mth… take $200 of that monthly savings and put it towards your mortgage and you’ve just reduced your mortgage amortization by 5 years saving yourself $20,000 over the life of the mortgage.

There are several ways to benefit from the low rates… Low rates are great when you need to borrow money…  Enjoy the savings…

Your best interest is my only interest!

As always I welcome your comments, calls and questions.

Steve Garganis 416 224 0114 steve@mortgagenow.ca