With rates on the rise, is it worth a 2nd look at longer term mortgages?
- Rates have substantially increased over the last 6 of months. We have seen 3 prime rate increases with more on the horizon.
- Fixed rate mortgages have also followed suit due to bond market instability and the increases are noticeable.
- Consumer sentiment has rapidly moved from Variables rates to longer term Fixed rates of 5, 7, and 10 years.
The long-term trend for rates is up!
The advantage of Fixed rates is that they provide clients with added security and stability against this recent storm of volatility. This storm doesn’t seem to have an end in sight either with many questions still to be answered in the coming months. When will bond rates stabilize? Will global pressures continue to drive increases? Will we see a return to historical norms? What will be the impact of recent events on the Canadian economy?
Collateral charge mortgage registration … is a big deal in most circumstances.
- This is a method of registering your mortgage currently used by nearly every Chartered Bank / Big-6 Banks at this time.
- You are unlikely to avoid it if you are at a Big-6 Bank so it is important to understand the ramifications.
- Avoiding having your mortgage held by the same institution as the balance of your debts such as; credit cards, over drafts, unsecured credit lines, car loans, etc. This is worth serious consideration. See the bold summary in the last paragraph below.
- Have your mortgage as a stand alone piece of a bank-relationship if you must place it with a Bank
- Ask about more information re ‘Monoline‘ lenders; broker lenders that do not register this way.
The Financial Consumer Agency of Canada website provides the following definition;
Collateral Charge (a.k.a ‘All-indebtedness’) – A type of mortgage whose features may include the ability to potentially borrow additional funds, subject to your lender’s approval, without the need to discharge your mortgage, register a new one and pay legal fees. If you want to switch your existing mortgage to a different lender at the end of your term other lenders will not accept the transfer of your mortgage. This means you may/ probably will need to pay fees to discharge your existing mortgage and register a new one in order to change lenders. The fee for this is the lawyer charge incurred.
Many people are unaware the Big-6 banks, and all the banks you can walk into, calculate the payout penalties at much higher amounts than mortgage broker lenders.
The cost of how penalties are calculated is even more concerning when fixed-mortgage rates stay flat or rise slightly over an extended period – exactly what is happening right now.
Payout penalties – how the Big-6 banks get you, Example 1Bank rates, payout penalties
Below is a great example of how the Big-6 banks get you on an early mortgage payout.
“The rate is the rate, but the details are the details!” said Grandma Herman.
Top Alberta mortgage broker for home purchases and mortgage renewals
Grandma always said, “The price is the price, but the details are the details!”
There are discounted and restricted mortgage rates out there but they do not share the details of their disadvantages up front with you.
- Restricted or Limited Products / Bait & Switch
People will not even sign a 3 year cell- phone contact any more but they will try to save $15 a month on a restricted mortgage; which could cost them $30,000 as a payout penalty – BUYER BEWARE is what the regulators say.
I love this article from the Globe as it explains why rates are going up a bit and what expectaions are for the near term.
Call for a rate hold if you are thinking of buying in the next 4 months!
“Borrowers who use a mortgage broker pay less …,” Bank of Canada.
See our reviews here: https://www.markherman.ca/CustomerREVIEWS.ubr
TD does collateral registrations and also look at everything you do on line. Not only do they love your money, they also love your data!
Stop trusting the big banks and talk to a mortgage broker to protect your data and your money.
This is just in from TD Economics, a .75% Prime rate increase is expected to be phased in – probably in 1/4% increases – starting in July 2017 and being fully in by December.
The rates they show below are for corporate rates, consumer rates are a bit higher.
Wages and home prices are sticky – economically speaking. No one wants to work for less than they did yesterday or sell their home for less either. So the prices hold.
Today, any busy real estate agent will tell you the home market for anything less than $450 – 500k is moving quickly if priced correctly. $500 – 750k is slower and above $750k is very slow. This all makes perfect economic sense.
All recessions are tough – but the sky is not falling. Below is one of the better articles we have seen on why this one will not be that bad.
Mortgage Mark Herman,
Calgary Alberta mortgage broker for home purchase and mortgage renewal.
Only two recessions in Calgary since 1987 and both more severe than 2015 forecastMario Toneguzzi, Calgary Herald
Published on: September 28, 2015 | Last Updated: September 28, 2015 3:42 PM MDT
While Calgary’s economy has been sluggish this year and most experts are forecasting a recession, it will be a mild one compared with what the city has gone through in the past.