Mortgage cost today is $1380/mth for every $300k… and sharing high net worth secrets.

Fixed mortgage rates went up this week on the wholesale market.   Only about a 0.10% increase…  We are still way below 3.00% for 5 yr fixed rates. Hey, that’s pretty good!  (watch for the media to blow it out of proportion soon.. they seem to love feeding on negativity).

Thought I’d share some quick numbers..    Did you know that a $300k mortgage will still carry for $1380/mth?   And that’s with a 25 yr amortization.  If we go to a 30 year amort, the payment drops to $1221/mth.

Let’s increase the mortgage to $400k.. payments are $1840/mth and $1628/mth for a 25 and 30 year amortization, respectively.   Hey, these are still incredibly low mortgage rates.   Anything under 4.00% should be considered a gift.  (I’ll get into what Canada’s wealthy are doing in a few moments)

Realistically, we should be budgeting on rates of 5.00% or so, with our mortgage.  And in fact, most homebuyers will qualify at 5.00% mortgage rates.  Bet you didn’t know that?   That’s right!  Most homebuyers have the capacity to carry and qualify at 5.00% mortgage rates.   Yet, you wouldn’t think so by reading the news reports.

BIRD’S EYE VIEW on mortgage rates… If we stand back and take a look at where rates are, how can anyone not agree, that rates are still incredibly low and attractive?    If we were to reverse this, maybe go back 20 years, when rates were in the 7% range, what would we be thinking?    Back then, no one could dream that rates would be this low.   I’m sure anyone would tell you to borrow as much as possible.. it’s almost free money!   And that’s partly true.. but we don’t support borrowing just for the sake of borrowing.

There’s an old saying when it comes to the stock market… ‘buy low, sell high’.   With mortgages rates, its ‘borrow low, sell high’.   That means borrowing when rates are this low, isn’t a bad option…  when then go back up to ridiculous levels, that’s when you want to reduce your borrowing level.

HIGHER NET WORTH CLIENTS..   So, here’s another bit of inside info..  Want to know what higher net worth individuals are doing?   You guessed it.  They are borrowing more now.. today!  While mortgage rates are low.  They want to put that money to work by investing in real estate, stock options, investment in their businesses, etc.   They understand that taking advantage of these low rates makes sense.

Notice I didn’t say they are taking trips to Hawaii, or buying a new Benz or BMW..   That’s not what the wealthy do.  They don’t spend frivolously.  Are the ‘pessimists, doom and gloom writers’ listening?    We aren’t promoting drunken spending sprees.   We support sound strategic investing ideas.   No ‘get rich quick schemes’ here.    Want more info… you know where to reach me.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca