Tagfixed rate mortgage

Posted November 9, 2013 Money saving tips

Tips on how to reduce your mortgage penalty

Interest rates are still near record low levels. You’ve heard your co-workers, friends or family brag how lucky they were to renew into these once in a lifetime rates.

But how you do you take advantage? If you break your fixed rate mortgage then you face an enormous prepayment penalty…we’ve seen reports of $10k, $15k, $20k and even $30k in penalties….Wow!

Well, here’s a few tips…

-first, if you are in a 10 year fixed rate mortgage, and your are at least 5 years into the term, then the maximum penalty is 3 months interest (this is a little known fact… Section 10 of the Interest Act of Canada).

-One more way to reduce the penalty is to utilize the annual prepayment privilege that’s within the mortgage. Most mortgages have between 15% and 25% prepayment privileges which equates to a 15% to 25% reduction in the penalty…. Continue reading “Tips on how to reduce your mortgage penalty”

Posted September 5, 2013 Interest rates

Real estate sales up 21% and 52% due to end of low fixed rates.

August real estate resale numbers are in…. and what a jump! Up 21% in the Greater Toronto Area and an incredible 52% in Vancouver. And here’s another interesting stat. The average home price in Toronto is $505,000. That’s a 5.5% increase from the previous month.

REAL ESTATE SALES DRIVEN BY HIGHER RATES..

But here are my thoughts on what caused the increased sales. I think it has more to do with the steady mortgage rate increases that we’ve seen since May. You see, most Lenders and Banks will offer rate holds of 120 days. So that means you could have got a 5 year fixed rate mortgage preapproval in May for under 3.00%…. Those record low Fixed rates definitely forced many homebuyers to buy for fear they could miss out on the low rates. Continue reading “Real estate sales up 21% and 52% due to end of low fixed rates.”

Posted June 9, 2013 Bank News

Banks raise mortgage rates

RBC is raising their rates… As expected, fixed mortgage rates have gone up. RBC is the first of the BIG SIX to raise their rates. RBC’s 4 yr rate special will go to 3.09% from 2.99% and their 5 yr rate special will go to 3.29% from 2.99%.

Of course, these are NOT the best rates in the wholesale mortgage market, nor are they the best fixed rate products. But RBC is the largest mortgage lender in Canada, so we must take note. This rate increase is no surprise. As reported on May 13th and May 28th, bond yields had increased over 30bps in May. A rate increase was imminent.

Wholesale mortgage rates started to go up a few weeks ago. And as of June 10th, all Lenders will have increased their rates by around 10bps.

Remember, 5 yr fixed rates are still below 3.00%. I don’t think there is any reason to panic. We can expect the other BIG SIX banks to follow with their own rate increases. Fixed rates are closely tied to the Canadian govt bond yields. And with the stock market in the U.S. hitting unexpected record highs, and the our own Toronto Stock market making significant gains, it was only a matter of time before rates moved. Economists still believe rates won’t go up quickly. It will take time for rates to go up significantly.

Your best interest is my only interest.

As always, I welcome your comments, calls and questions.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Posted March 21, 20133 Comments Consumer Debt

Canadian Govt doesn’t want you to find the lowest mortgage rate.

Yesterday, we saw our Federal Minister of Finance, Jim Flaherty, admit to having his office phone up Manulife Financial and ask them to stop advertising their 2.89% 5 year fixed rate mortgage special. An unprecedented move for a government official… Yes, it’s true! But wait, it gets better (or worse). Flaherty admitted to calling up BMO personally, to ask them to stop advertising their 2.99% 5 year fixed rate (NO FRILLS mortgage). click here for the article.

Now, just a comment about these products and rates…. if you are a regular visitor to CanadaMortgageNews.ca then you’ll know the BMO low-rate (or NO FRILLS to be more accurate) is a terrible product with too many restrictions and limitations… Manulife has a decent product….rate is competitive, however, like most other Bank’s, there is some mystery about what their best rates really are… so once again, you can’t rely on a website or bank advertising when it comes to finding the best mortgage…a mortgage broker is the best way to get unbiased advice with access to dozens of Lenders. Continue reading “Canadian Govt doesn’t want you to find the lowest mortgage rate.”

Posted November 9, 201211 Comments Interest rates

O’Leary only wants Fixed rate mortgages…really?

CBC News did a report about Renting vs. Buying, earlier this week.. And it featured Kevin O’Leary and Amanda Lang, two well-known TV personalities….Ok, we covered Rent vs. Own in great detail just a few months ago… And I also talked about using your home as a retirement fund, earlier this week in my Baby Boomer 10 year retirement plan article.. But this isn’t what I want to talk about… I want to talk about some comments O’Leary made about Fixed Rates, during that report.

UNPOPULAR COMMENTS AGAINST O’LEARY

I’m taking a chance by speaking out against Kevin O’Leary. But I must speak up regarding something as important as this… So here it goes…

O’Leary is starting a new mortgage company….Congrats! I’m sure he’ll do well. He said his company would ONLY offer Fixed rate mortgages because Mr. O’Leary doesn’t believe ANYONE should be in a Variable Rate mortgage…. he went on to say that because Fixed Rates are so low, you would have to be insane to stay in a Variable Rate…Hmm.. well, if you are one of my clients then you know how absurd this statement is…

2008-09 MORTGAGE HISTORY LESSONS

Over 80% of my clients are, or have been in a Variable rate mortgage… Most of them enjoyed rates of Prime less 0.75% or better… some even had Prime less 0.90%..and for a while, they enjoyed rates as low at 1.35%!!! During the 2008-09 recession, we were inundated with TV and Media personalities telling us to lock into a 5 year Fixed rate mortgage because of the sub-prime mortgage crisis and stock market crash… You remember that? I do… and I recommended clients do the opposite.. take short-term mortgages until the dust settled on interest rates… This WAS NOT the popular advice… It was panic time…. but that’s when you need to remain calm and review the facts…

Fortunately, most of my clients didn’t listen to the media and followed my advice. I recommended several different products… 6 months, 1 year, 2 year, 3 year and even the short-lived 3 yr Variable rate… In ALL cases, it was the right product choice…. It was the best option at the time for that particular client…My clients have saved $$thousands each and every year through my advice!

(historical fact… Variable rate mortgages have been a cheaper way to finance your home in over 88% of time…Professor Milevsky study.)

TODAY’S STRATEGY

Unfortunately, new Variable rate products aren’t priced as well today…. This is probably that other 12% of the time….And although I am not recommending Variable rates today for most borrowers, it still might be the right product for some… To say everyone should get out of their Variable rate is just bad advice! The GOAL IS TO PAY THE LEAST AMOUNT OF MONEY TO OWN OUR HOMES!

My criteria for choosing Fixed over Variable depends on many factors but here are 3 things I pay close attention to:

1-Variable rate pricing not as attractive.. the best Variable rate today is Prime less 0.35% (3.00% less 0.35% = 2.65%)…..

2-Fixed rates are at historical lows (just over 3.00%).

3-the spread between 5 yr Fixed and Variable should be over 1.00%…today it’s less than 0.50%.

Add all of this up and it’s an easy choice today….I cannot recommend Variable Rate for most NEW mortgages….

THIS DOESN’T MEAN YOU SHOULD GET OUT OF YOUR VARIABLE RATE!!!

If you have a Variable rate of Prime less 0.75%, I would stick with that… that’s 2.25%… why start paying over 3.00%? There is no forecast for immediate rate increases… And this is where I am very concerned…. We have a very well known TV personality that comes out and says everyone should lock into a Fixed Rate mortgage…. I’m sure the BANKS would love to see you out of a 2.25% mortgage and into a 3.00%+ rate. I completely disagree with O’Leary. There is no ‘One size fits all’ mortgage. Everyone is different and has different needs… I’d be very careful about listening to anyone that wants to pigeon-hole all Canadians.

BEWARE THE TV EXPERTS… Just a final note…. How many times have you heard ‘Rates are going up soon’ in the last 4 years.? You must lock into a Fixed Rate… I hear it everyday…. and if my clients listened to these ‘Experts’ they would have been out of their Prime less 0.75% Variable rate and into a 4.00%, 5.00% or even 6.00% fixed rate mortgage! Those that have listened to the facts have done extremely well. There isn’t a crystal ball… it’s not magic, it’s simply viewing the mortgage landscape, current economic trends, monitoring inflation rates and paying attention to govt and policy makers… I really don’t watch the news or listen to any media or TV personalities. I just look at the facts and present them here.

As always, if you have any comments or questions or would like to know what strategy is best for you, give your mortgage broker a call.. or call me if you don’t have a broker. I’d be happy to help.

Steve Garganis 416 224 0114 steve@mortgagenow.ca