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

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.

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.

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...

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.

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

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

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.

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

WTF? That's just nasty.

And sudden increases in the payment wouldnt be?

When interest rates fall does the amortization period reduce?

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.

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.

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...