A discussion topic. This has been covered as a general topic in many Real estate threads but it is very dependent to the current trend of the financial market.
Considering the current situation, I am seeking your insight on the option of choosing either Fixed or Variable.
Fixed - you can get up to 4.90 - 4.95.
Variable - you can get up to P-0.9.
Situation.
1. Economy prediction - I expect there may be a 0.25% drop in the interest rate in near future.
2. Economy seem to be showing some resilience and bouncing back or at least not looking as if it is heading south.
3. On the same line, there isn't much hope whether we will see continuous interest rate drop in future as in past.
If fixed for 5 years is opted, I am not predicting a significant compromise considering the above scenario and don't really see a bad deal.
If variable for 5 years chosen, I will be starting to pay a higher rate compared to the fixed and would be able to reap a benefit of the predicted rate cut coming in next 2-3 months but after wards, the prospects of interest cut is bleak so the chances are high that it goes flat or might even increase hurting my interests.
I am leaning towards fixed but like to wait till Feb-March end to finalize the mortgage so that my fixed rate will reflect the latest interest cut, supposedly that happens.
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The cowards never started,
The weak died on the way,
Only the strong arrived.
http://www.youtube.com/watch?v=_yK1i9cLAMM
Quote:
Originally posted by JRF
A discussion topic. This has been covered as a general topic in many Real estate threads but it is very dependent to the current trend of the financial market.
Considering the current situation, I am seeking your insight on the option of choosing either Fixed or Variable.
Fixed - you can get up to 4.90 - 4.95.
Variable - you can get up to P-0.9.
Situation.
1. Economy prediction - I expect there may be a 0.25% drop in the interest rate in near future.
Fixed rate mortgages move with the movement of rates in Bond Market while the variable rate moves with the change in Bank's Prime Rate which is dependent on Bank of Canada's over night lending rate. The Bank of Canada announces its over night lending rate 8 times every year and based on the same the banks adjust their prime rates.
Fixed rate mortgages have already gone up and most of the banks now offering 5 year fixed rates from 5.20% to 5.30%. If you have not locked your rate earlier then the chances of getting 4.9% to 4.95% till the time of your house closing are very slim.
We are also expecting a drop in Bank's prime rate in near future which will bring down the variable rate mortgage but whether it would happen sooner or later, no body can predict. It may even go higher if the Governor of Bank of Canada decides that economy demands the same. Hence we can always keep our fingers crossed.
Quote:
Originally posted by JRF
2. Economy seem to be showing some resilience and bouncing back or at least not looking as if it is heading south.
That's more the reason you can not expect any thing with certainty about the movements in variable rate mortgages.
Quote:
Originally posted by JRF
3. On the same line, there isn't much hope whether we will see continuous interest rate drop in future as in past.
If fixed for 5 years is opted, I am not predicting a significant compromise considering the above scenario and don't really see a bad deal.
Yes.. The rates may go down (?) but may not go down to the levels they were couple of years ago. So, the 4.90% for a 5 year fixed may not turn out to be a bad deal. On the other hand a variable rate of prime - 0.90% or prime -0.95% may turn out a better deal if some one who will now fix for 5 year term at 5.25%.
Quote:
Originally posted by JRF
If variable for 5 years chosen, I will be starting to pay a higher rate compared to the fixed and would be able to reap a benefit of the predicted rate cut coming in next 2-3 months but after wards, the prospects of interest cut is bleak so the chances are high that it goes flat or might even increase hurting my interests.
I am leaning towards fixed but like to wait till Feb-March end to finalize the mortgage so that my fixed rate will reflect the latest interest cut, supposedly that happens.
See above. And make sure that the fix rates are already locked for you till the closing of your house and you may find that to be a better deal as you would not have to worry for changing rates environment for 5 years.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Pramod,
Thanks for the info.
As you said, given the current trend there isn't a huge benefit in picking the variable and also the compromises of fixed do not really outweigh significantly against the benefits of variable.
I am looking to keep this thread open so that as the time goes , members can continue to use this according to the Financial scene of their time....
-----------------------------------------------------------------
The cowards never started,
The weak died on the way,
Only the strong arrived.
http://www.youtube.com/watch?v=_yK1i9cLAMM
Location: carl sagan's universe
Posted on: 31-01-07 14:48:31
Hi JRF,
If you don't mind, would you please share with the forum the institution that is offering the fixed rate of 4.9-4.95%.
It is an unusual rate at this point in time, though there might be an institution or 2 that is having a rate sale- please do let us know the institution and if there are conditions such as a score in the 800's or other such thing.
Thanks
Now I see the ground is slipping under my foot and suspicious. 
I think the fine print need to be viewed with a big magnifying glass.
BTW, It is not through the bank but through a mortgage broker. I will double confirm this with him and post. More over my focus was to get the mortgage approved than settling for the rate as there will be good 60-70 days to close the deal.
Quote:
Originally posted by investpro
Hi JRF,
If you don't mind, would you please share with the forum the institution that is offering the fixed rate of 4.9-4.95%.
It is an unusual rate at this point in time, though there might be an institution or 2 that is having a rate sale- please do let us know the institution and if there are conditions such as a score in the 800's or other such thing.
Thanks
-----------------------------------------------------------------
The cowards never started,
The weak died on the way,
Only the strong arrived.
http://www.youtube.com/watch?v=_yK1i9cLAMM
Quote:
Originally posted by JRF
Now I see the ground is slipping under my foot and suspicious.
BTW, It is not through the bank but through a mortgage broker. I will double confirm this with him and post. More over my focus was to get the mortgage approved than settling for the rate as there will be good 60-70 days to close the deal.
Quote:
Originally posted by investpro
Hi JRF,
If you don't mind, would you please share with the forum the institution that is offering the fixed rate of 4.9-4.95%.
It is an unusual rate at this point in time, though there might be an institution or 2 that is having a rate sale- please do let us know the institution and if there are conditions such as a score in the 800's or other such thing.
Thanks
One of my clients just closed on his house and we got a rate of 4.95% fixed rate through a mortgage broker friend of mine.
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Vimal Patel, Realtor
Homelife Royalcorp Real Estate Inc., Brokerage
Cell: 416-887-3745
Office: 905-856-6611
Fax: 905-856-6232
vimal.patel@gmail.com
http://www.vimalpatel.ca" rel="nofollow">LINK
Location: carl sagan's universe
Posted on: 01-02-07 00:09:05
Quote:
Originally posted by vimpatel
One of my clients just closed on his house and we got a rate of 4.95% fixed rate through a mortgage broker friend of mine.
Would you please be so kind as to share the name of the institution with the rest of the forum?
Please note I am not doubting your word- I just wish to know the name of the institution.
Thanks,
