Skip to content

CategoryMortgage Tips

Posted 2 Comments on What mortgage product does your bank want you to take? Case study

What mortgage product does your bank want you to take?

Here are some interesting stats…

-A Variable rate mortgage outperforms a fixed rate mortgage in over 88% of the time… According the Milevsky study done earlier this decade and updated in 2008….

-Variable rate mortgages have been at least 1.00% lower than the 5 year fixed rate mortgage over the past 25 years….and on occasion, better by as much as 2.00%.

-Canadians move every 3 years on average…meaning they must either refinance their mortgage or pay it out.

-a Variable rate mortgage has a fixed penalty of 3 months interest.

-a 5 year fixed rate mortgage has a penalty that is at least 3 months interest but has no limit…. and in the past 18 months, we have seen penalties of 6, 10 and even 14 months worth of interest.

-yet, 66% of Canadians have a 5 year fixed rate mortgage…

Is the 5 year fixed rate mortgage really the right product for 66% of Canadians?    Can the 5 year fixed rate mortgage be the right product for everyone?  Which mortgage product do you think your bank wants you to choose?

By the way, can you guess which mortgage product is the most profitable?…. you guessed it.. the 5 year fixed rate.

Make sure your Mortgage Broker does a needs analysis before they recommend a mortgage product for you…. There is no ‘one size fits all’ when it comes to mortgages….  Ask yourself, ‘who is this mortgage best for’…. my bank or me?

Posted Mortgage News

Don’t expect new mortgage penalty laws til next year…maybe.

Mr. Potter would be proud

Seeing that it’s near Christmas, I thought this old classic movie pic was appropriate for today’s topic.  “The house always wins” (in case you can’t read the small print).   And how true that is…

It sounds like the long-awaited Federal Govt’s Standardization of Prepayment Penalties won’t happen til some time next year at the earliest….maybe.    A good source told me that the Govt wants to put that Bill through together with several other Finance laws…..but I’m beginning to wonder if they will make any changes at the pace they are going.

The Bank lobbyist’s have done their jobs well.   Mr. Potter would be proud.   Record low mortgage rates brought us record high mortgage penalties.   6, 10 and even 14 months of interest were charged as prepayment penalties to Canadian borrowers in the past 20 months.   To put it another way, we have seen penalties of $10,000, $20,000 and more. Continue reading “Don’t expect new mortgage penalty laws til next year…maybe.”

Posted 1 Comment on Debt consolidation… it’s not a dirty word Consumer Debt

Debt consolidation… it’s not a dirty word

What’s the first thing you think of when someone says ‘debt consolidation’?  Trouble… or, you can’t pay your bills…cashflow problems… We probably all think there is some financial problem..

Sure, that’s the popular reaction…and who can blame us for thinking that way with the recent media hype about Personal Debt concerns…  One day we have an article saying that Personal Debt levels are high or increasing… The next day, Canadians are conservative and managing our debts well.  This flip-flop would confuse anyone.  click here for some articles from earlier this year.

But debt consolidation can actually be a good thing most of the time…  And that time is now.  You’ve heard of ‘buy low and sell high’… Well in credit, you ‘borrower when rates are low to save high amounts of money’…

With record low interest rates it makes sense to borrow….If you own a home, have some equity and have some non-mortgage debt, such as credit cards, a car loan, a student loan, a line of credit, etc…  These debts probably carry a higher rate of interest than what you could get through a mortgage…  Debt Consolidation is a smart thing….paying less interest puts money in your pocket.

Here’s a good calculator to figure out how much you can save…DEBT CONSOLIDATION CALCULATOR.

Use these rates for comparison…Mortgage rates are well under 4.00% today… a 5 year fixed rate is somewhere around 3.59% and Variable rates are around 2.25%…  compare this with 12% to 18% credit cards, 6% lines of credit, 7% car loans, etc… Rolling these debts into a mortgage is not a bad thing, it’s a smart thing.   Paying less interest just makes good financial sense.

And as always, speak with someone who knows and understand financial matters… talk with a qualified Mortgage Broker or Financial Planner….

Posted Mortgage Tips

Sell your home with a below market interest rate

Saw an article this week that talked about low mortgage rates being used an incentive to help sell your home faster.   Most mortgages are assumable, meaning the buyer of your home can take them over upon qualification.

If interest rates increased significantly, then having a 3.69% mortgage could lead some buyers to your home.

Another strategy that is used during a slower housing market is to buy the interest rate down to below market rates… this is something that would need to be negotiated at the time of signing the mortgage but it is offered by a few major lenders…

Posted Case study

Uncover the hidden equity in your home

Turn on the TV, listen to the radio, read a newspaper or talk to someone at the office water cooler.   What are we hearing?  ‘House prices fall’….  ‘Mortgage rates are going up’…

Okay, are you ready to hear some good news?   Let’s talk about what’s really happening and how YOU can benefit.

Firstly, house values are actually stable according to the Canadian Real Estate Association (CREA).  The article goes on to say that House sales may cool this fall due to a robust Spring market and that house prices may fall.  Hey, that’s okay.. we don’t want to see a runaway market… but that should trigger us to do something now.   Take advantage of these incredibly low rates.

Interest Rates are at historical lows and yet I don’t see much news coverage about that…did you know that a 5 year fixed rate can be had for around 3.69% and in some cases even better for qualified borrowers….   Variable rate is also great… 2.30% is an excellent rate…. and Economists are forecasting for no real increases until the Spring…

REFINANCE WHEN RATES ARE LOW

It’s really no secret…. you’ve heard of buy low and sell high?… well, with interest rates it’s ‘borrow when rates are low and get rid of high interest rate debt’….. This is the best time to borrow money. Here’s how you can benefit….

Let’s suppose your situation looks like this:

  • have a house worth $350,000
  • a mortgage balance of $200,000 @ 5.00% with payments of $1,100/mth.
  • credit cards $8,000 @ 12.00% with payments of $240/mth
  • a line of credit $10,000 @ 6.00% with payments of $300/mth
  • car loan of $15,000 @ 6.00% with payments of $480/mth
  • you want to invest some money into rrsps or resps or some other GOOD investment for $20,000….
  • your monthly payments total $1,640.

Here’s what you could be doing:

  • increase your mortgage by up to $80,000 to $280,000
  • pay off all that debt and take the extra funds (up to $47,000) and invest or use as you require
  • your payment based on today’s 5 year fixed rate of 3.695 would be $1,427/mth
  • your payment based on today’s Variable rate of 2.30% would be $1,227/mth

Your cashflow would actually improve and you would put money in your pocket.

This is just one example of how you could benefit… we all have different needs and different situations…get your finances analyzed by a qualified Mortgage Broker.   See how you could benefit….It’s a great time to borrow…