Mortgage rates
 

So, what's a good interest rate nowadays?

My bank seems to be offering 2.25 (Prime -0.75%) for a 5 year term variable rate. Am I likely to do better shopping about?

Variable seems a better bet at the moment than a fixed rate (4%ish) Base rates have been low for a long time now.


Yes, I know this is dead lazy, but someone out there must know this stuff and be looking for some Karma:)

TIA

Re: Mortgage rates
 

I think 2.25% variable is the going rate for good quality borrowers from the major banks. You might be able to negotiate a little bit lower. Our local credit union is currently offering a 5 year variable rate of 2.1%.

Variable mortgages should be cheaper than fixed. As long as you can make the payments if prime doubles then it is a reasonable option.

Re: Mortgage rates
 

One difference I have noticed with my variable rate mortgage (and I don't know how general this is to Canada) is that when interest rates increase your monthly payment does not. This is of course both good and bad. It means you don't have to worry about being able to make higher payments, but also your amortization period lengthens. Not sure if you can request that payments change in line with interest rates shifts.

Re: Mortgage rates
 

Cheers for that. My local credit union doesnt seem to be doing much to get the business.

Second question...
Does the CMHC insurance premium thing still apply to renewing a mortgage? The appraised value of the house now far exceeds the balance remaining on the mortgage? Never quite figures how that worked anyway...

Re: Mortgage rates
 

If your new mortgage is under 80% of valuation I can't see why it would.

I'd be quite happy with prime - .75 at the moment. I think fixed rates are overpriced and overhyped here. I'd take variable and overpay if you can.

Re: Mortgage rates
 

I believe mortgage insurance applies when your mortgage is more than 80% greater than the value of your home (i.e. less than 20% down) so this will not apply in your case:

http://www.canadamortgages.ca/new25down.html

Re: Mortgage rates
 

Thanks again, thats kind of what I figured, but good to get a 2nd/ 3rd opinion too.

Re: Mortgage rates
 

It would scare the life out of me. My plan for a comfortable retirement definitely does not include paying a mortgage. Continuing to make low payments while the mortgage extended into my later years is unthinkable.

I have my borrowings split between fixed and variable. Payments for the variable part go up with increased interest rates. It is an available option.

Re: Mortgage rates
 

The plan for me is to exploit the lower variable rate to pay off the principal that much quicker. Its dependent on the rate staying low of course, but there will be some overpayment built in I expect in case rates go up. Ive been on a fixed rate, and it hasnt been worth it with hindsite, takes too long to pay down the principal significantly in the early years. Having kids hasnt helped of course:D

Re: Mortgage rates
 

WTF? That's just nasty.

Re: Mortgage rates
 

And sudden increases in the payment wouldnt be?:sneaky:

Re: Mortgage rates
 

When interest rates fall does the amortization period reduce?

Re: Mortgage rates
 

Yes it would as you will be overpaying. Of course with getting a new mortgage every few years you can mess around with amortization anyway when you renew. I tend to think in terms of payments I am ok with for 5 years, then look again when I renew. So the initial mortgage might be 20 years, on renewal after 5 I might shift it to 10 etc.

Re: Mortgage rates
 

The difference is that you'd be expecting the rate you pay to go up and down with the prime rate. Well, I would. Maybe Canadians expect the amortization period to change.

Re: Mortgage rates
 

As long as you know which it is I dont see it much matters. As Mr Martin points out, after a few years its time to revisit it all again anyway...

Re: Mortgage rates
 

Yeah. I guess I was just taken aback by the thought of this happening - as JonboyE says above, if you don't realize then it could be quite alarming if you think you are coming to the end of your mortgage but suddenly find you've got a year or two left.

Re: Mortgage rates
 

It came as a surprise to me as I was waiting for a letter telling me my payment would be going up. Of course it never did and my payment didn't change. With the odd quarter of a percent its not a big deal, but you could easily get to the point where your payment wouldn't even be covering the interest. I'm not sure whether in that case they do act. I now overpay, though of course not by as much as I think I am :)

Re: Mortgage rates
 

I found this out after I had signed up for a 5 year fixed. I didn't know how long it would take to be earning a decent salary and I wanted the security of a "fixed" payment. When I realised that it would not go up regardless I was more than a little miffed.

Hey ho

Re: Mortgage rates
 

Hmm. I have a variable rate....0.82% below prime til 2013. Payment very definately varied with changes in interest rate until I told them not to drop it any further as rates decreased. I think I'm paying at an equivalent of 4.25% or so meaning that I am paying down my mortgage faster. That's a good thing.;)

Re: Mortgage rates
 

So does anyone know the answer to this? - if you initially took out a mortgage with CMHC insurance (less than 20% down) and now if you remortaged, with some capital paid down and an increase in property value, the mortgage would now be less than 80% of the property value. So would those additional insurance amounts disappear from the remortaged loan or are you stuck with them??

Re: Mortgage rates
 

Isnt that exactly what I was asking? You refinance the balance as is, with no additional premium.

The reason I asked was that some mortgages offer a "skip a payment" option. I thought mine did, but it turns out (so they say) that if its CMHC covered that option is not in play. Something to clarify with them next time around I guess, although obviously its not an option I want to take up unless absolutely necessary.

Re: Mortgage rates
 

I didnt have CMHC this time around, but I did remortgage a year in to a 5 year closed mortgage as rates had changed a lot and i wanted a better deal. It required a revaluation. I would assume that the valuation at the point of the new mortgage would be the one used in any determination - be it in your favour or not.

Re: Mortgage rates
 

Apologies, I must have skipped over your post, but seen the subsequent answers

Re: Mortgage rates
 

Its also worth going for biweekly payments instead of monthly too - for the sake of the equivalent of one more monthly payment a year, it shaved about 9 years off the mortgage!

Re: Mortgage rates
 

Id get confused as I get paid bimonthly... bound to end up short at some point when that extra payment slips out. Better I think for me to be able to make an extra payment now and then instead... YMMV.

Re: Mortgage rates
 

I get paid bi-weekly so that would make sense. Though everyone else in the office has just changed over to twice monthly for some reason which defies logic.

Re: Mortgage rates
 

Remember, there are accelerated weekly/biweekly payments and the standard form of weekly/biweekly payments. It is only with the accelerated payment method that you really make a gain, like yourselves. With the standard method, the gain is peanuts in comparison.

Accelerated is where they divide your annual total payment by 48 and not 52 (for weekly or 24/26 for biweekly), thus you end up making an additional payment within the year. This is where you make most of the gains and not by the fact that you are paying more frequently.

Re: Mortgage rates
 

Here is a good blurb which outlines the gains to be made by an accelerated payment schedule:

"Accelerated bi-weekly payments

http://www.lendingmax.ca/artman/publ...e_payments.php

Bruce Schoenne, RI, AACI, P.App.
Aug 11, 2009 - 7:46:00 PM
RSS?
How do accelerated bi-weekly mortgage payments work and how can they help pay my mortgage off quicker?

If you're looking for ways to pay off your mortgage quicker, you have three basic options; reduce your amortization period, increase your monthly mortgage payment or change the way you make your payments.

If changing the way you make your payments sounds appealing, than accelerated bi-weekly mortgage payments might be just the ticket.

Not to be confused with semi-monthly mortgage payments (24 payments per year), accelerated bi-weekly mortgage payments (26 payments per year) will not only pay your mortgage off quicker, but it's guaranteed to save you a significant amount of money over the term of your mortgage.

Here's how it works.

Let's say you have a mortgage of $100,000, an interest rate of 5.00% and an amortization period of 25 years. Your monthly mortgage payment would be $581.60 and your total payments for a year would be ($581.60 x 12) $6,979.20.

To understand the savings accelerated bi-weekly mortgage payments can make, take the monthly mortgage payment of $581.60 and divide it by two ($581.60 / 2 = $290.80). Then take that payment and multiple it by 26 to arrive at your total of all payments for the year ($290.80 x 26 = $7,560.80).

There's the difference. Using the monthly mortgage payment plan, you've made a total of $6,979.20 worth of payments for the year, while using the accelerated bi-weekly mortgage plan you've made $7,560.80 worth of payments, a difference of $581.60. Basically with accelerated bi-weekly mortgage payments, you're making one additional monthly payment in the year.

Using this example, you would reduce the amortization on your $100,000 mortgage from 25 years to just over 21 years and a total savings on interest, over the life of the mortgage, to just over $12,000.

If you can possibly find a way to make accelerated bi-weekly mortgage payments, do it! You'll thank yourself later.

Looking for more information on accelerated bi-weekly mortgage payments? "

If you opt for 'Accelerated weekly' it reduces the term to 19 years and change.

I went this way, and payed off my mortgage in 14 years 11 months on an original 25 year amortization, with some additional mortgage pay down applied in addition to the gains from making accelerated weekly payments.

Re: Mortgage rates
 

I have to admit that I am very surprised by that figure. I fail to see how the amortization period would reduce by more than a third simply by making (in essence) one extra monthly payment each year.

Now, if the original amortization period was 50 years, as opposed to 25, I might be convinced!:p

Re: Mortgage rates
 

I pay my mortgage accelerated weekly (I get paid semi-monthly) paying every Friday is actually quite easy as it's not a big sum every week I don't really notice it like I would with one or two big chunks coming out every month and paying accelerated lets me pay it off quicker :)

Re: Mortgage rates
 

But it does, check with your bank if you have a mortgage and are not convinced. Over the life of the average mortgage (25 years), the interest is significant and it is this you are reducing.

Re: Mortgage rates
 

It wouldn't reduce it as much as suggested. HSBC offer a simple calculator.

I did $300,000 over 25 years at 4%.

Accelerated bi-weekly pays it off in 21.9 years, saving around 19K in interest.

Re: Mortgage rates
 

Looked at a few calculators available...this one is quite well done:

http://www.dominionlending.ca/hosted...biweekpaym.php


And the Feds Calculator...has pretty good explanations to go along with it:

http://www.fcac-acfc.gc.ca/itools-io...lator-eng.aspx

They are all pretty close with regard to the dollars and cents saved by using the accelerated approach.

I found the savings on 300K at 4% (same amortization period) was around 25K (based on what the calculators spewed out for me...

Either way...quite a few beer tokens...

Re: Mortgage rates
 

No it does not- it was only for the initial purchase. Your interest rate is pretty decent- just check the small print for paying off early though, you could be subject to and Interest rate Differential penalty which could be hefty.

Re: Mortgage rates
 

No, the insurance is added to the mortgage at the outset e.g.

$100,000 mortgage principal
$1500 CMHC insurance premium

Total mortgage is now $101500.

The insurance is part of the mortgage, which you have been paying down over the period. If your house value increases to having more than a 20% equity position, then you will not have to pay CMHC premiums again going forward.

Re: Mortgage rates
 

Yes, you are correct. Apart from paying accelerated weekly, I managed to get my mortage down quickly because, as interest rates went down, I maintained the same payment. Beware if they go the other way though.

Re: Mortgage rates
 

They tell me that in order to remove the CHMC lein that prevents the skip a payment option applying to the mortgage, I would need to refinance... which involves lawyers who charge more than my mortgage payment costs anyway, so it appears that if renewing (even with a different mortgage structure), rather than starting a whole new mortgage, then the lein is still there, even if its not actually costing you anything at that point.

Only important if the option to skip a payment is important to you, so I can live with it I guess.

Re: Mortgage rates
 

Do you think the skip a payment is a wise move, unless you are really stretched of course? The interest is still there and has to be paid eventually. It is like an accelerated payment mortgage in reverse.

Re: Mortgage rates
 

No I agree, not a good idea, but if the car suddenly dies and you end up with a big bill and your savings are tied up elsewhere at the time it might be a convenient option over running up the credit card balance.

Never used the option yet in ten years, but then again it turns out I couldnt if I had wanted to anyway. It strikes me that most of the people who have mortgages started at less than 20% down are in the same boat, regardless of what the glossy advertising copy says.

Re: Mortgage rates
 

Couple of questions about mortgages :-

If you're only putting 5% down, does the interest rate the bank will offer your differ significantly from if you was putting 20% down?

Do they vary the interest rate according to your credit score?