Mortgage Advice
Amidst all the recent financial doom and gloom there is one positive result. Interest rates are going to be low for awhile. Any one renewing or obtaining a mortgage can feel a lot safer going with an open variable rate.
The last I checked I could get an open variable mortgage at 2.25% with the 5 year term being close to 4%. That’s a difference of 1.75% those savings can be substantial. For example if you are renewing a $200,000 mortgage that difference would save you $3500 per year in interest charges. Over 5 years that would be $17,500. Now wouldn’t that be better in your pocket than your lenders? I think that is something we all would agree on. Imagine the savings to those people with $400,000 mortgages. There is some risk that your rate could raise but I believe that risk has been substantially lowered and you have the option of locking in at any time if economic circumstances change. If you are still concerned many lenders offer a product where your payments are based on the 5 year rate but your actual rate is open. This way your payments are not subject to change and any extra money over and above the 2.25% is applied to your principle thus paying down your mortgage that much faster. Should the rate rise above the 4% during the 5 year term the extra interest is added to your principle. With this product you have the benefit of the lower interest but no risk of higher payments during the term.
Always remember to shop around at renewal time. Find the best rate and product that suits you and ask your lender to match it. In most cases they will. Remember lenders are in the business of selling money and are profit driven. There is nothing wrong with them charging you as much interest as they can or as much as you are willing to pay. One extra point or % means more profit for them. Many lenders have what they call roving mortgage professionals. These are the people that will come to your home and see you after hours and on week ends. Most are on commission and many can offer you a better rate than the branch. The reason for this is the lenders realize these people are on the front lines competing for mortgage business. This latitude gives their roving sales team one of their most important tools to compete. This tool is a more competitive rate.
I am always amazed at those individuals that are willing to pay a higher interest rate because of loyalty to a particular lender. Remember it is no good to try and borrow money on a rainy day for an umbrella. Lenders have no loyalty to you. Shop and get the best deal.
Larry
Amidst all the recent financial doom and gloom there is one positive result. Interest rates are going to be low for awhile. Any one renewing or obtaining a mortgage can feel a lot safer going with an open variable rate.
The last I checked I could get an open variable mortgage at 2.25% with the 5 year term being close to 4%. That’s a difference of 1.75% those savings can be substantial. For example if you are renewing a $200,000 mortgage that difference would save you $3500 per year in interest charges. Over 5 years that would be $17,500. Now wouldn’t that be better in your pocket than your lenders? I think that is something we all would agree on. Imagine the savings to those people with $400,000 mortgages. There is some risk that your rate could raise but I believe that risk has been substantially lowered and you have the option of locking in at any time if economic circumstances change. If you are still concerned many lenders offer a product where your payments are based on the 5 year rate but your actual rate is open. This way your payments are not subject to change and any extra money over and above the 2.25% is applied to your principle thus paying down your mortgage that much faster. Should the rate rise above the 4% during the 5 year term the extra interest is added to your principle. With this product you have the benefit of the lower interest but no risk of higher payments during the term.
Always remember to shop around at renewal time. Find the best rate and product that suits you and ask your lender to match it. In most cases they will. Remember lenders are in the business of selling money and are profit driven. There is nothing wrong with them charging you as much interest as they can or as much as you are willing to pay. One extra point or % means more profit for them. Many lenders have what they call roving mortgage professionals. These are the people that will come to your home and see you after hours and on week ends. Most are on commission and many can offer you a better rate than the branch. The reason for this is the lenders realize these people are on the front lines competing for mortgage business. This latitude gives their roving sales team one of their most important tools to compete. This tool is a more competitive rate.
I am always amazed at those individuals that are willing to pay a higher interest rate because of loyalty to a particular lender. Remember it is no good to try and borrow money on a rainy day for an umbrella. Lenders have no loyalty to you. Shop and get the best deal.
Larry
Larry Matthews is a recognized expert in Nova Scotia real estate. He is licensed as a real estate broker, real estate appraiser and mortgage broker. The Nova Scotia Legislature has passed a resolution recognizing Larry and his wife Peggy for the success of their company Hants Realty Limited. The Municipality of East Hants awarded Hants Realty Limited with a certificate of recognition for providing 25 yrs of quality service to the residents of East Hants. Larry is an author,photographer,artist and publisher. http://www.easthants.com http://www.larrymatthews.com
