Posted on: 17-07-05 11:25:58
Hi Pramodji / Amit / Other desis,
I need your opinion on the mortgage deal what I got. Can u pls confirm me, is it worth locking in or not?
3 year closed - 3.85%
or
Variable rate - 0.85% (Today 4.25% - 0.85% = 3.4%)
Plus
Free chequing account
$ 500 cash back
Secured line of credit @ Prime
I think its a good way to proceed for 3 year, but needs your advice on it.
Thanks
Hello,
In todays' economy, there is little doubt that anyone can certainly say which mortgage is better, variable or fixed term. however, with the information that you have provided, and considering Bank of Canada's Governor's recent statement that it is the time to start raising the interest rates, I would personally be more inclined to go for 3 year closed.
In any mortgage, in the initial stages, most part of a payment goes to service the debt, meaning that most of it goes towards the interest and less toward equity.
If you go for 3 year closed at 3.85% 25 year amortized loan, your monthly payment is going to be $517.92 for every 100,000 loan. At the end of the term (36 months), of the total payments of $18646.12, you would have paid 11,043.30 towards the interest and $7601.82 towards the equity. On the otherhand, considering variable rate of interest at 3.4% today, which probably will be overtaken by a half percent increase in 6-7 months, you may be paying 3.9% or more for the most of the term (29-30 months). In that event your payment to service the debt will be higher and most of it will go towards the interest.
Again, the above is based on the hypothetical situation that the rates will increase in 6-months. You may also consider the possibility of converting variable to closed when the rates start going up. Most likely, they will edge up as slowly in the increments of 0.25%. SO you can lock up the moment they start going up (but you may not get 3.85% then).
Interest rates are affected by the global economic factors and world peace. Wish we all had a crystal ball to predict with certainity what would be better. Good luck with your decision. And if possible, please share same with us at CDs with the reasons. It may be of some help to others who are in the same dilemma.
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Rajeev Narula, Broker, REALTOR®
ACE TEAM REALTY INC., Brokerage
10 Kingsbridge Garden Circle, Suite 704
(Opp Square One - HWY10/403)
Mississauga, ON L5R 3K6
Bus: 1-888-355-3155 Ext. 300
Fax: 1-888-443-3155
Email:
Web: http://www.RAJEEV.ca" rel="nofollow">LINK
Quote:
Orginally posted by nishi200
Hi Pramodji / Amit / Other desis,
I need your opinion on the mortgage deal what I got. Can u pls confirm me, is it worth locking in or not?
3 year closed - 3.85%
or
Variable rate - 0.85% (Today 4.25% - 0.85% = 3.4%)
Plus
Free chequing account
$ 500 cash back
Secured line of credit @ Prime
I think its a good way to proceed for 3 year, but needs your advice on it.
Thanks
The 3 year rate you have mentioned is really a very good rate and if you want the security of paying a fix payment for 3 years without having to worry for the change in payments, you should certainly go for it.
On the other hand the variable rate is also very good and if your mortgage is not much then you can opt for this also but before opting for variable, you have to find out how the bank is compounding the interest (monthly or semi annually) and if the bank would allow you to make weekly or bi-weekly payments or not. Most importantly, if the mortgage is CMHC insured, make sure that the bank does not charge additional premium of 0.25% on the variable rate mortgage because that might eat away a portion of the savings you get by getting prime – 0.85. If you are not sure, give me a call and I will tell you whether the variable rate from your bank is really worth or not and if these free stuff have some meaning or not.
Good luck.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Thanks Rajeev and Pramodji,
I completely agree, what you have said. I make up my mind, I feel safe with 3 year risk.
My question to you (being active person in this field), Is (3.84%)this the best rate for 3 Year fixed or some one can beat that too?
or
What is the best rate for 3 year fixed available today?
Offcourse, this rate I get from big bank with all standard terms and condition (20/20 payment, flexibility to change payment & its frequency, air miles, no CMHC, good credit score, etc).
Thanks
