Is this a good rate?
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When u say go fixed aren't u doing the same thing..
Quote:
Originally posted by Blue_Peafowl
Off topic:
It’s funny how people generalize terms and predictions.- if everyone taking variable then we should also go with that ( but we should remember each individual has different needs and capacity)
Fixed vs variable boils down to a matter of risk taking ability.
When the spread is 1.75% between variable and fixed i still see variable coming out trumps because i dont see the prime going beyond 5% in the next 5 years.. what that means is at the most u will end up paying 4.3% which is only .5% higher than the current fixed of 3.8% that too when the interest are at its peak.
In the mean time over 5 years the benefit of the 1.75 spread will probably put u in a net gain and in the worst case if u get into bad finacial position u can still sell the house without getting into IRD penalties.. this in my opinion is the balance tipper , because a closed variable is almost like a open mortgage with only 3 months interest as penalty..
In the market u see a lot of Power of sales because of the IRD... when bad times fall people realize that the IRD amounts to more than 5% of the house value and unless there is significant appreciation u get nothing from the sale instead have to pay out of pocket (IRD + realtors 3 to 5% ) so people find it easier to file bankrupcy and walk out.
I have had variable (Prime - .95) for 2 years now.. on a 200K mortagage all i have paid is 6K$ interest. If i had gone fixed(5% at that time) i would have paid over 20K in interest in the past 2 years. mind u prime was 4.75 when i bought the house.
I am already up 14K in 2 years and interest are still far below what it will take for this balance to even up in the next 3 years..
In my opinion everyone should go variable and i have come to the conclusion based on my personal experience..
Location: Brampton, Ont, Canada
Posted on: 29-07-10 10:39:48
We are talking about past - people who has variable 2-3 years ago has saved lot of money... but it is not a case anymore.
Situation has changed, V will not benefit much from VRM vs FRM at current situations - chances are V may start losing going VRM
My point is rates will go up, it may not go up faster but for sure it will go up
Yes, definitely VRM looks good at this moment t down the road V will not see that rosy picture. – we will always have to worry about rates and changes towards lifestyle ( unless u are expert and have lot of saving to handle situation) otherwise it not wise to go with VRM right now.
Just stay focus and locked it for fix at least u will not have to worry about dramatically changes later on
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'Some goals are so worthy, it's glorious even to fail.' (Param Vir Chakra awardee Lt. Manoj Pandey)
If prime interest rate goes to 5% the economy will move back to recession and the government will again start dropping rates faster than gravity can hold..
IMO If u cant take risk u better not buy a house because more than VRM or FRM owning the house at current prices is the biggest risk in todays economy.
Quote:
Originally posted by Blue_Peafowl
We are talking about past - people who has variable 2-3 years ago has saved lot of money... but it is not a case anymore.
Situation has changed, V will not benefit much from VRM vs FRM at current situations - chances are V may start losing going VRM
My point is rates will go up, it may not go up faster but for sure it will go up
Yes, definitely VRM looks good at this moment t down the road V will not see that rosy picture. – we will always have to worry about rates and changes towards lifestyle ( unless u are expert and have lot of saving to handle situation) otherwise it not wise to go with VRM right now.
Just stay focus and locked it for fix at least u will not have to worry about dramatically changes later on
Location: Brampton, Ont, Canada
Posted on: 29-07-10 11:25:46
Sorry Dudewheresmycar but I kind of disagree with you comment that
“IMO If u cant take risk u better not buy a house because more than VRM or FRM owning the house at current prices is the biggest risk in todays economy.”
People need shelter, people buy house because of various reason – we can’t generalize that it’s always very RISKY to buy house. – risk is everywhere
One example: I have seen bigger family renting 3+1 BDR house and paying rent 1800+utility –and decided to buy house - where is risk ??? – they have 3 income coming even if one lose job they are still be ok.- Let’s say if they don’t buy house they still have to rent a place ( 6 members in family ) – they still need to make money to afford rent – so risk is also there – right ?
There is so many other reason why people buy house – So Important thing is how much they can afford easily – and how the will handle
Again, I would say First time home buyer should go with Fix rate instead of variable at current stage- by getting fix rate you know how much money you will need and you can plan ahead – VRM has no guaranty ( it looks rosy but VRM comes with bigger risk) – so Why Risk – pay some price to belittle more safe
Quote:
Originally posted by dudewheresmycar
If prime interest rate goes to 5% the economy will move back to recession and the government will again start dropping rates faster than gravity can hold..
IMO If u cant take risk u better not buy a house because more than VRM or FRM owning the house at current prices is the biggest risk in todays economy.
Quote:
Originally posted by Blue_Peafowl
We are talking about past - people who has variable 2-3 years ago has saved lot of money... but it is not a case anymore.
Situation has changed, V will not benefit much from VRM vs FRM at current situations - chances are V may start losing going VRM
My point is rates will go up, it may not go up faster but for sure it will go up
Yes, definitely VRM looks good at this moment t down the road V will not see that rosy picture. – we will always have to worry about rates and changes towards lifestyle ( unless u are expert and have lot of saving to handle situation) otherwise it not wise to go with VRM right now.
Just stay focus and locked it for fix at least u will not have to worry about dramatically changes later on
-----------------------------------------------------------------
'Some goals are so worthy, it's glorious even to fail.' (Param Vir Chakra awardee Lt. Manoj Pandey)
Go look at the real estate market in the US.. Property prices have fallen almost 40% from its peak.
Canada is sitting on a similar US style bubble, afford ability is at a all time low
U tell me which is a bigger risk
1> losing 40% of ur home
2> Taking a chance on paying or earning a few thousand on mortgage
3> renting
Quote:
Originally posted by Blue_Peafowl
Sorry Dudewheresmycar but I kind of disagree with you comment that
“IMO If u cant take risk u better not buy a house because more than VRM or FRM owning the house at current prices is the biggest risk in todays economy.”
People need shelter, people buy house because of various reason – we can’t generalize that it’s always very RISKY to buy house. – risk is everywhere
One example: I have seen bigger family renting 3+1 BDR house and paying rent 1800+utility –and decided to buy house - where is risk ??? – they have 3 income coming even if one lose job they are still be ok.- Let’s say if they don’t buy house they still have to rent a place ( 6 members in family ) – they still need to make money to afford rent – so risk is also there – right ?
There is so many other reason why people buy house – So Important thing is how much they can afford easily – and how the will handle
Again, I would say First time home buyer should go with Fix rate instead of variable at current stage- by getting fix rate you know how much money you will need and you can plan ahead – VRM has no guaranty ( it looks rosy but VRM comes with bigger risk) – so Why Risk – pay some price to belittle more safe
Quote:
Originally posted by dudewheresmycar
If prime interest rate goes to 5% the economy will move back to recession and the government will again start dropping rates faster than gravity can hold..
IMO If u cant take risk u better not buy a house because more than VRM or FRM owning the house at current prices is the biggest risk in todays economy.
Quote:
Originally posted by Blue_Peafowl
We are talking about past - people who has variable 2-3 years ago has saved lot of money... but it is not a case anymore.
Situation has changed, V will not benefit much from VRM vs FRM at current situations - chances are V may start losing going VRM
My point is rates will go up, it may not go up faster but for sure it will go up
Yes, definitely VRM looks good at this moment t down the road V will not see that rosy picture. – we will always have to worry about rates and changes towards lifestyle ( unless u are expert and have lot of saving to handle situation) otherwise it not wise to go with VRM right now.
Just stay focus and locked it for fix at least u will not have to worry about dramatically changes later on
Affordability is all time low from long time but govt. made debt so cheap that people start thinking monthly payment (0/40,5/35) is called home ownership. All these people are now underwater or will be soon if they don’t have solid fast forward payment.
Lot of people on this forum too were/are in deny mode for long time that Canada is different and our Real Estate can not go down and tons of supporting reason - immigration, tight lending standards, banks are great, no subprime, Rich Asian will take care, Olympics, oil, interest can not go up, govt. can not screw RE market and etc. Smart money already left Canadian RE investment.
I am not against owning home but it's all about timing, timing, location.
If someone can rent cheaper than owning and RE trend is downward in future (July will be 40% sale off) then there is no reason to buy except you expecting short term capital gain in RE (Vegas has better wining chance).
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Exactly same condo I am renting in my building is on MLS for 300K today. I start renting 2 yrs back when it was going for 370K and my rent going down every 6 months. I paid in $38K in rent in last 2 yrs.
2 yrs Ownership cost: 70k (price depreciation) + 7600 (condo fee)+ 500(maintenance)+ 3000(taxes) + ??(only interest paid to the bank) = 81K+bank interest.
Difference: 81k – 37k = 43K at least
I did not include closing cost, CMHC fee, realtor’s fee if selling and other miscellaneous expense.
Quote:
Originally posted by dudewheresmycar
Go look at the real estate market in the US.. Property prices have fallen almost 40% from its peak.
Canada is sitting on a similar US style bubble, afford ability is at a all time low
U tell me which is a bigger risk
1> losing 40% of ur home
2> Taking a chance on paying or earning a few thousand on mortgage
3> renting
Quote:
Originally posted by Blue_Peafowl
Quote:Be careful of making such an assumption.
Originally posted by dudewheresmycar
If prime interest rate goes to 5% the economy will move back to recession and the government will again start dropping rates faster than gravity can hold..
Interest rates are not directly related to recession or boom.
It is quite possible that interest rates can rise during recession.
For example, if there is rampant inflation without real GDP growth.
Central banks may be forced to raise rates even if it will cause a recession.
Also, fixed mortgage rates are more determined by bond yields rather than central bank interest rates.
The central bank does not control market bond yields, esp. the 5 year bond yields.
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