Last updated 6 years ago
Remember all the work and research that went into finding the best rate for your first mortgage? Whether you spent months making sure your credit was as good as can be, or spent hours on the Internet searching for the best rate, it seems silly to waste that effort by blindly renewing with your existing lender when your first term is up.
The truth is, the best lender is only as good as the term that you sign with them. When it comes time to renew, many offer their clients an inflated rate hoping that you'll be complacent enough to simply sign it back. Other clients particularly the new ones, or those that take the time to negotiate receive the lender preferred rate, which can sometimes be as much as half a percentage point lower.
While that may not seem like much now, it adds up over the life of the mortgage and almost certainly overrides any savings you experienced in that first term. For example, if you had a 25-year, $200,000 mortgage at the posted rate of 4.08% you would be paying approximately $1057 per month, compared to approximately $1,018 per month at the discounted rate of 3.72%. While this isn't a lot if you look at it from a monthly perspective, if you look at the long-term, you're paying $118,220 in interest on the higher rate mortgage, compared to $106,572 on the lower rate mortgage. That's a difference of $11,672.
Obviously you're likely not going to keep the entire rate for the life of a mortgage, but if the interest costs could be even greater if you merely renew at the going rate, term after term. That's why it's important to employ the services of a mortgage broker throughout your entire mortgage lifespan. Not only will this ensure you're getting the best possible rate available, but it will also give you the opportunity to see if there are other mortgage products in the market that are better suited to your changing needs.
For more information, contact Nelson Sousa at 877-817-9984.
Last updated 6 years ago
Mortgage rates have been exceptionally low in Canada for the past several years. Most economic analysts expect them to rise during this year and next year. But what exactly affects how mortgage rates are determined and how they change for the home buyer?
There are two types of home mortgages, variable mortgages and fixed rate mortgages.
Variable Mortgage Rates
The Bank of Canada’s key interest rate influences the prime rates of commercial banks. For the most part, these prime rates determine what your variable mortgage rate will be. If the Bank of Canada decides to raise the key interest rate, as it does when it is trying to fight inflation, the variable mortgage rate will almost always rise. If interests are on a steady decline, a variable mortgage rate is the way to go.
Fixed Mortgage Rates
These are mostly determined by the yield on Canadian government bonds of corresponding maturity. The difference between the rates of bond yields and mortgage rates equals what banks and financial institutions require to lend the money on the mortgage market, and thus what they charge for the fixed rate.
So, which type of mortgage rate is right for you? When interests rates are high, there may be a chance that they could drop, so a variable rate might make sense. If they’re low, and set to rise, you may want to lock in a fixed mortgage rate. If a variable rate makes you nervous, you may feel more comfortable with a fixed rate, knowing that what you pay next year will be the same as this year.
Whether you’re a first time home buyer or refinancing your home with a second mortgage, Nelson Sousa is your mortgage expert. Mortgage financing and refinancing can be stressful and difficult, especially in a fluctuating market. Let us offer our experience and guidance. Give us a call at (877) 817-9984, or visit our website.
Last updated 7 years ago
Are you looking for more information about the topics addressed in our recent posts? Read through the following resources for more details about home loans and the various types of mortgages available to homeowners today.
- For more on adjustable rate mortgages, see this Federal Reserve Board overview. Here you’ll find a mortgage shopping worksheet, a list of consumer cautions, and general information about ARMs and what they entail.
- To learn more about fixed-rate mortgages, visit BankRate.com and read through this overview. In it, you’ll get basic details on the types of fixed-rate loans, their advantages and disadvantages, and links to other helpful home loan procedural resources.
- For a comprehensive list of articles on how to buy a home, apply for a mortgage, and pay off your loans, see this HUD.gov page.