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CategoryMortgage Rates

What Nobody Is Telling You About Fixed Rate Mortgages

My father keeps the news on constantly. It’s like an addiction, and CP24 is his drug of choice. It hurls bad news all day and all night. Not because it’s helpful, or even that interesting – but because it keeps his eyeballs on the screen. My father isn’t alone. CP24 and other 24-hour news sources are tattooed onto screens across the country.

Unfortunately, a lot of that bad news has to do with the housing market. It seems as though there’s a constant parade of “experts” telling you that we’re in a bubble. To sell now and rent until the market corrects itself. To avoid “risk” and go with a fixed rate mortgage. 

This last myth in particular has gone viral and needs to be dispelled.

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Don’t Fall For Low Fixed Rates

The fixed rate versus variable rate debate has never been more heated. With fixed rates currently averaging historical lows of roughly 2.25%, a lot of people are left wondering, “why wouldn’t I choose a fixed rate mortgage?” Fair enough – it certainly appears to be a safe bet on the surface. Lock in a low rate. Maintain it for the entirety of your term. Never worry about rates going up.

This belief is fuelled by the big banks spreading hysteria that variable rates are sure to shoot up. Why risk it when you can go with a record low fixed rate? Here’s the truth: The banks are pushing 5-year fixed rate mortgages because they’re more profitable for them. A variable rate mortgage isn’t the gamble it’s made out to be. In fact, it’s by far the more prudent move. 

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How to Benefit From Low Rates

How to benefit from record low interest rates

While average mortgage size and average real estate prices have gone up, interest rates have not. They’ve actually done the opposite. And they have gone significantly lower.

A $400,000 mortgage will cost you $1400 per month today.  Compare this with $1682 per month from a few years ago. Or how about a payment of $2,182 per month From 15 years ago.

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New Year New Outlook

New Year New Outlook

2020… It will be known as the year of the pandemic. It will also be known as a year of a record-setting real estate market. We saw records for volume of sales and new high prices in many cities across Canada. To say there was a lot going on is an understatement. I have to admit I was happy to close my office and give everyone the week off between Christmas and New Year’s.

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Because not everyone fits into the same box

You might have seen the headline “HSBC crushes mortgage records with 0.99% variable rate”. No doubt about it, this is a great rate. However, it’s not for everybody. It is important to remember, like most deals, there are some restrictions. Among other things this offering is limited to high-ratio mortgages with a downpayment of less than 20 per cent. The reality is a higher interest rate may apply for non-owner-occupied properties, amortizations greater than 25 years and other exceptions to standard lending guidelines. 

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