Historical Interest Rates
Some of you may remember when mortgage rates hit 21%-. Those were volatile and different times. In the last 10 years we have seen mortgage rates in the 3%-7% range. The market has changed dramatically.
The interest rates we have in Canada today are low compared to the past. This is another reason to consider the security of a fixed rate term. 20 years ago most people would lock in their mortgage rate for 25 years and never think about it again – now the typical choice is a 5 year fixed term mortgage and many people consider variable rates. When making a choice that is where the expert advice from CENTUM Core and a Mortgage Broker will make it easier for you.
Should I Take a Variable Rate Mortgage or Lock in My Rate Now?
This is not an easy decision on your own–that is where we can help you out. We take into consideration your risk tolerance – past rate trends–the current market–the future predictions – to help you make the best decision that you will be comfortable with. Variable rate mortgages are about 35% of the marketplace now. When you understand how a Variable Mortgage works—you will see that you will have the option to change or covert to a fixed term anytime you are in your term—most important is to get the RIGHT variable rate product because they can be tricky and they are not all alike—we know the preferred Variable products and give you access to them.
How About Short Term or Fully Open Mortgages?
Sometimes you have to consider your future plans before locking in your mortgage term and rate.
Are you going to move in 1 or 2 years? If so you might need a short term mortgage—since breaking long term mortgages can often cost thousands in penalties to break–so we will ask you about your future plans so you are guided properly. There are Fully Open Mortgages that allow you the opportunity to break them anytime without penalties or hassles... But you need to get the right one.
A lower Rate Can Cave You Big Bucks!
Because the mortgage most people require to buy a home is so large, a small difference in the interest rate can really add up over the life of a mortgage - usually 20 or 25 years. Here are some examples.
First, let's look at the total cost of buying a home with a mortgage. A $160,000 mortgage loan at an interest rate of 7 per cent will cost you an unbelievable $176,200 in interest over 25 years. That means your total outlay is $336,200, not including your down payment. The impact of interest rates on the cost of your mortgage is so great that even if you manage to only lower your interest rate by a fraction, you can significantly reduce that total price tag. For instance, if you reduce the interest rate in the above example by half a percentage point, you would save $14,685 over 25 years. Another effective way to cut your total bill is by paying the loan off faster. For instance, shortening the amortization (or life) of the mortgage to 20 years will save you $40,785 in interest.
Note that these calculations assume that interest rates will remain constant for the next two decades or more. Chances are they won't. When your mortgage comes up for renewal in six months or a year or five years, whatever term you have chosen, rates may be substantially higher - or lower. This will have a significant impact on your payments.
The Interest Rate Gamble
Each time your loan comes up for renewal, you are faced with the difficult choice between less expensive, short-term financing and more expensive, longer-term financing. Fortunately at CENTUM Core we can assist you in finding the best rates and best products available that are always changing. We take into consideration all the lenders in the business and rate specials that come available only to our company — this way you have access many opportunities instead of dealing with just one lender!
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