Variable Interest Rate Mortgages – The Good, The Bad, and The Not-So-Ugly
So we see things on the news, hear them again on the radio, then (sometimes) learn another version of it all from friends, family, or random blog posts. Here’s a summary of what’s really going on.
RUMOUR – RATES ARE GOING UP, UP, UP SO VARIABLE INTEREST RATE MORTGAGES ARE SCARY:
First thing to understand? Rates don’t just go up, up, up with no rhyme or reason.
Because they’re more exciting, today, let’s focus on VARIABLE interest rates.
When the changes happen, some Lenders will adjust your next month’s mortgage payment amount BUT some Lenders won’t adjust your payment and will instead decrease the portion of your payment that goes to Principal and increase the portion that goes to Interest.
Variable rates are currently low, low, low. For some mortgage products, there is even a 1.0% or more gap between the fixed and variable rates. This means that the Bank of Canada would need to increase the Overnight Rate FOUR times in order to hit today’s current fixed rates.
The next increase in Prime is expected at the Bank of Canadas July 11, 2018 meeting and possibly one to two more increases are expected in the following year. Hard to say if there will be more increases to follow those but that still means you’d likely be saving a fair amount of money in the first year at least.
Of note: If you are someone who will get anxious every time the possibily of a rate increase comes up, although the rate may be higher, please consider that perhaps the stabiltiy and peace of mind from a fixed interest rate is more for you?
DID YOU KNOW
If you ever get too anxious and want out of your variable rate mortgage, you can switch over to whatever fixed rate your Lender is offering at the time with no penalty.
Or, if there are much lower fixed promos available at other Lenders, you can always consider breaking your mortgage and doing a switch because the penalty to break a variable rate mortgage is only 3 months’ interest. Not only that but a lot of Lenders will even let you add that penalty (up to $3000) into your new mortgage with them when you move over!
Did you know that the Bank of Canada publicly posts a full list online of when they plan to meet for the year??
Find it here.
They even have a handy link that lets you add the Bank of Canadas calendar to your calendar so you dont even have to manually input reminders into your calendar! (Youre welcome!)
If you have questions about variable interest rate mortgages or would like to secure a rate hold pre-approval for an upcoming purchase OR mortgage renewal, please do not hesitate in contacting me at 780-863-0700.
Remember, call Minn for MINN-imum Stress, Maximum Service.