Comments on: Time to opt for a variable-rate mortgage again?

By: Snow

Snow — Sat, 23 Oct 2010 06:28:39 +0000

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By: Mortgage Loans

Mortgage Loans — Fri, 26 Feb 2010 09:05:49 +0000

People find it difficult to repay their loans in these days. This results in creating a
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By: Refinancing Your Home | Canadian Capitalist

Refinancing Your Home | Canadian Capitalist — Wed, 14 Oct 2009 01:24:27 +0000

[...] strategy is to pay the termination fee on your long-term mortage and then go for a variable rate or 1-year deal. The rates are so low that this is very tempting. However, if you do this you are [...]

By: Kevin_405

Kevin_405 — Thu, 08 Oct 2009 17:40:02 +0000

This is how i chose variable when i got my mortgage in May 2008..

I was offered prime minus 0.95 (Prime was 3.75)

I went on BOC website and took prime for last 10 years and discounted it by 0.95 for the 10 years and calculated interest for the 10 years on my mortgage amount.

Did the same with fixed for 10 years (actually i was only offered 5 year fixed at 5.2%).

Guess what my variable came out slightly better than fixed.

At that time i didn;t anticipate any upward interest rate movement so choose to take the difference of 2.3% interest as a big advantage.. For my 200K morgage on a annual basis it was working out to 4600$ per year..

Guess what the interest rates went down to the tank and not the advantage has grown to 8000$ per year.

Variable interest will always win..

No way interest rates can go up above 5% prime with out killing the housing market and destroying the economy

Hopefully banks remember to bring back the good old prime minus days..

By: Brendan

Brendan — Wed, 07 Oct 2009 18:48:29 +0000

P.S if you still want to lock in and pay higher interest, please choose BMO or BNS for your mortgage so that your money will be transferred to my broker account via dividends.

By: Brendan

Brendan — Wed, 07 Oct 2009 18:46:09 +0000

I always go variable, and have the payment = the 5 year rate. You were prepared to make a payment based on a (x) year mortgage anyway.
If your institution doesn’t allow that then go variable and shuffle the savings into a separate account. Every six months or so make a “double up” payment.

By: Brian Poncelet, CFP

Brian Poncelet, CFP — Sun, 04 Oct 2009 21:45:47 +0000

My thoughts are always go variable, but if in doubt split the mortgage into two parts one variable one fixed.

The economy is better with all the government money spent after that who knows? If rates go up too fast then the V recovery will be a W or maybe a L.

By: Friday Links | The Canadian Finance Blog

Friday Links | The Canadian Finance Blog — Fri, 02 Oct 2009 09:03:47 +0000

[...] Canadian Capitalist asks if it’s time to opt for a variable-rate mortgage again? [...]

By: John

John — Thu, 01 Oct 2009 15:07:48 +0000

Thanks Canadian Mortgage. I guess there is a lot more to this than just looking at ups and downs, like for what period etc… I don’t see myself becoming a bond watcher yet but thanks for the “taste”.

By: Canadian Mortgage

Canadian Mortgage — Thu, 01 Oct 2009 04:55:53 +0000

@Ben: If one assumes a 80%+ chance (just an estimate) of no further credit shocks next year–and hence no variable-rate premiums–then a 1-year is a good calculated bet.

The risk: Short-term rates soar and we head back up to prime + 0.75% or so for a few quarters….and then back down.

The likely best case is that you save 1/4% or so in years 2-5.

This is, of course, a very simplistic and generalized overview. Folks should always talk over their specific situation with someone that can give one-on-one professional feedback.

Cheers,
Rob