Canada in recession, rate cut likely: TD. What the?
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This depends on what int rate he is getting.
If an increase of 3 or 4 quarter doesn't bother you much then variable is better. If you are somebody who keeps on thinking about interest rate and think that it will never go up then go for fixed. usually 4 year and 3 year fixed are not bad.
Location: Brampton, Ont, Canada
Posted on: 21-07-15 09:13:11
at this moment variable rate is the good options - don't forget to get mortgage with flexible payment options... which includes paying off mortgage fast and less penalty to switch mortgage term.
Lock-in to fixed rate only if you're uncomfortable with fluctuations
BTW: If you are going with 20% + down payment then HELOC is good options too - read some article on internet before taking decision
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Quote:
Originally posted by MAK3
Thx AT
if rates are not going up or nor going down, atleast it would be better to lock it for less stress. My understanding is that you can lock into fixed rate MTG from Variable , the new rates would be based on the prevailing rates which could be up or down depending on that time.
I suggested 2 year fixed now since the variable is also in same boat. maybe 5 yr fixed is an option as he is first time home buyer
MAK
Yeah, when you lock in ..it will be the fixed rate at that time. .not todays fixed rate.
Also some banks have a minimum of 3 years or something like that when you try to lock in your variable to a fixed rate MTG.
5 yr fixed is also a good option for less stress /first time buyer and if there is NOT much difference between the variable and fixed rate. I would say if the difference is 0.5 % or less than go for the 5 yr fixed instaed of 5 yr variable for peace of mind. Next 2 yrs rates are not going anywhere , but years 3,4,5 they should creep up..they are not going to stay this low forever and recession won't last forever
Also see how much pre payment he can make every year without any penalties..you can greatly reduced your amortization by doing that.
Prepayment could be an increase in montly payments and/or a lump sum directly towards your principal each year , without any penalties ..usually the yearly pre payment allowed is between 10% to 20 % per year.
Also go for weekly or bi-weekly MTG payments if you can as opposed to monthly..you save more in interest and pay off faster as opposed to monthly.
Paying $ 250/ week will pay off faster than $ 1,000/ month.
Also take advantage of all pre payment facilties without penalties if you can afford to ..like yearly lump sum payments or monthly % increase payments ..some banks allow you to increase your monthly payments by as much as 100 % without any penalties.
Thanks guys
As always good suggestions/thoughts. I just though 4 yr fixed is also not bad option . It is somewhere between 2 yr and 5 yr fixed and interest rates are less than 5 % fixed
