Posts Tagged ‘fixed rate’
Mortgage Qualifying Rates Explained
So you are looking for the best mortgage rate possible as well as how much you can afford. You are still undecided between the fixed and variable rate. Your mortgage broker tells you how much of a mortgage you can afford at the variable rate and the fixed rate.....but wait a second.....the amounts are different. Not only that, the variable rate option is a smaller mortgage amount even though the rate is less. How can that be? The answer is quite simple. When a lender qualifies you for a mortgage with a term of 5 years or greater, they use the contract rate to determine the affordability. In other words they use the rate quoted on the commitment. This is not the case for variable mortgages or terms less than 5 years. In these cases they use the MQR (Mortgage Qualifying Rate) rate which is the 5 year posted rate. So even though the quoted rate for a variable might be prime less .70% (currently 2.05%) they qualify you based on 5.49% (the current 5 year posted rate). Why do Banks use different rates to qualify my mortgage? Lenders ...
Bond Yields Are Up – Will Mortgage Rates Follow?
We have been enjoying falling mortgage rates over the last few weeks, but we might be in for a reversal. Strong economic data released on Friday in Canada and the US has resulted in bond yields increasing by .14%. As I have explained before fixed rate mortgages in Canada are driven by government bond yields so it is probably only a matter of time before we see lenders start to increase rates. At the very least we will see a halt to the falling rates and we will probably hover where we are for the remainder of the year. Right now 5 year rates are slightly below 4% which is well off the 10 year average of almost 5.5%. The Bank of Canada will be holding its last rate announcement of the year tomorrow and it is expected they will leave the prime lending rate were it is. The Bank of Canada has pledged to keep rates where they are until mid 2010, but if we see continued positive job creation in the coming months they might be forced to start increasing rates.
New 50/50 Mortgage – The Best of Both Worlds
One of my lenders has come out with a new product.....a 50/50 mortgage. 50% of the mortgage is variable and 50% is fixed. Although this is not a new concept in the mortgage industry, the fact that the variable portion is prime plus .40 (currently 2.9%) is one of the lowest variable rates around at the moment. Combined with a fixed rate of 4.09% your effective rate is only 3.38%! For those of you who are sitting on the fence about whether to choose a variable or a fixed rate, this could be the perfect solution for you. You get the security of the fixed rate and you still get to take advantage of variable rates while they remain low for the next year or so. So who is is this mortgage ideally suited for? Customers who are unsure whether to go Variable or Fixed. This product eliminates the biggest dilemma facing mortgage borrowers in today’s economy. Customers who want a low interest rate and are more risk-averse than a typical variable rate client. The weighted average interest rate on this mortgage is approximately 3.38% given today’s current pricing! And only 50% of the mortgage is subject to interest rate risk. Customers who want added ...
