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Posted 2 Comments on Didn’t I say to stay away from these Hybrid Mortgages? Mortgage News

Didn’t I say to stay away from these Hybrid Mortgages?

Is it just me or are the Banks pushing these Hybrid Mortgages more these days…?  RBC recently reported that 40% of Consumers buying a home in the next 2 years would consider a Hybrid Mortgage…

Wow!  That’s much higher than any figure I’ve seen…  And it doesn’t reflect the current level of Consumers that currently have a Hybrid mortgage. (current figures are at 6% according the Canadian Association of Accredited Mortgage Professionals).

Globe and Mail’s, Chaya Cooperberg, took a closer look at this product…..Oh, and by the way, a Hybrid mortgage simply splits your mortgage ….. part fixed rate and part variable rate.  The theory is that you can benefit from today’s lower Variable rate but also secure a fixed rate to protect yourself from future rate increases….  Sounds great but these products are flawed and DO NOT work in the Consumer’s favor.

Here’s what you need to know:

-studies point to Variable rate mortgages as having the lowest rate of interest over the life of your mortgage.. they just save you money….(your rate fluctuates with Bank Prime…up and down)

-fixed rate mortgages buy you the security of knowing what your rate and payment will be…but the key word here is BUY. Your paying for this insurance with a higher average rate over the life of your mortgage…  (plenty of studies out there to show this).

-combining these 2 products in one mortgage will limit your options… there is a portability feature but it’s not straight forward and we’ve received different explanations on how this actually works….. these mortgages are not transferable to other financial institutions….

-many borrowers that are currently in these products have staggered maturity dates meaning they can never get out without paying some sort of penalty…….

A better alternative to getting part fixed and part floating, is to go with a Secured Line of Credit.. the Floating portion is Open to repayment without penalty…   Keep in mind these products are not portable to a new home and they are not transferable…At least you won’t get stuck with a penalty…

Posted Mortgage Products

Australian Mortgage often overlooked

One of the most under utilized mortgage strategies is the Australian Mortgage.  The Australian Mortgage uses an All-in-one mortgage product to minimize how much interest you pay over the life of the mortgage.  The product gives you full credit for any savings in  your bank account by applying this immediately to your mortgage balance.   The result is a shortened amortization that ranges from 5 to 10 years, depending your situation.

This isn’t for everyone….. The product is for those that earn a fixed income or have a steady pay cheque.   You also need a surplus every month…make more than you spend…it’s certainly worth a look at renewal time….