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Posted Mortgage Tips

5.5% Cashback mortgage… is this a good deal?

There are some interesting cashback mortgages available these days…. I’ve been asked if they are worth considering…

Let’s take a look at one of the better ones being offered out there…

The deal is simple.. you must take a posted 5 year fixed rate….currently at a very low 5.39%.  You get 5.50% back in cash.  Sounds pretty good but how does this compare with taking a discounted 5 year fixed rate of 3.69%?

We’ll use a $200,000 mortgage with a 25 year amortization in this example….

CASHBACK OFFER

  • 5.5% cashback equals $11,000 in cash to you.
  • mortgage rate of 5.39% will give you a monthly payment of $1,208.01.
  • your mortgage balance after 5 years will be $178,080.91

NO CASHBACK AND A DISCOUNTED RATE

  • interest rate would be 3.69%.
  • monthly payment is $1,018.70
  • your mortgage balance after 5 years will be $173,155.72.

And the end result is…..your monthly payments alone would almost balance out… there is a savings of $358.60 in favour of the discounted rate.   But look at the difference in the balance at the end of 5 years…. a $4,925.19 additional savings.

The obvious first choice is to take the discounted rate….but the Cashback is a good option for those that are just starting out or need funds for the initial expenses associated with buying a home….  The best choice for you will depend on your circumstances, goals and plans….. Talk to a qualified Mortgage Broker that doesn’t work for any one bank to understand the differences…

Posted 5 Comments on Mortgage Rate history…25 year chart Mortgage Rates

Mortgage Rate history…25 year chart

Here’s an updated 25 year Interest Rate Chart.   The chart gets updated monthly by Firstline Mortgages, a division of CIBC.   Click here to see the data.

The only surprise is that interest rates didn’t go up as many experts had predicted last year and earlier this year…  To sum up why in just one word……UNCERTAINTY…..  there is a lot of uncertainty about he global recovery and the domestic economy…. watch for interest rates to stay fairly flat through the rest of 2010….

Posted Mortgage Products

Taking a look at a 1 year and 3 year fixed rates

I’ve had some inquiries about taking a 1 year and 3 year fixed rate…and for good reason.   A 1 year fixed rate can be had for about 2.50% and a 3 year fixed rate is 2.90%.   This does make going with a shorter fixed term an attractive option if Bank Prime rate continues to increase.

Best Variable rate is around Prime less 0.65% or 0.70% for qualified applicants with some conditions….  that puts the Variable rate at 2.30% or 2.35%…

I like Variable rate mortgages for many reasons but these shorter, fixed terms can be a good alternative.. Make sure you understand all the terms and conditions… speak with a qualified Mortgage Broker.

Posted Mortgage Rates

Variable Rate is up 0.25%

Bank of Canada raised their Target Rate by 0.25% to 1.00%.   We will see the Retail Bank’s Prime lending rate go up from 2.75% to 3.00%.

Governor, Mark Carney, said “Any further reduction in monetary stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook,” .    This is sounding like we won’t see any further hikes til some time next year as the Government evaluates the economy and the global markets.

I still like Variable rate… at 2.30% to 2.50%, this is still much better than the 5 year fixed rate of 3.75%, which is what we are seeing today.

Posted Mortgage News

School’s in for Bank of Canada

To all the kids…. including my son…..”Have a great year at school.. make it fun… make it count”.

Tomorrow is the 6th of 8 scheduled meetings for 2010 by the Bank of Canada…a time when they set the Target Rate or Overnight Rate, which directly affects the Bank Prime Rate and your Variable Rate Mortgage.

The original plan called for Mark Carney, Governor of Bank of Canada, to raise interest rates steadily over the next year or so by as much as 3.00%… but it’s become a little tougher to make that move.

Less than impressive economic news in the U.S., Canada and the rest of the world has given concern about a double dip recession…. raising the rates during a period of uncertainty is risky business.   Right now, experts are calling for a 60% chance of a rate hike but then a pause to see how this will affect the economy.

Longer term forecasts have been amended for more modest rate hikes in 2011….  all good news for Borrowers…  stay tuned as we continue to monitor the latest reports…

Bottom line, new Variable rate mortgages can be had for around 2.05% to 2.10%… so even a 1.50% increase would  beat out a 5 year fixed rate….