Posts Tagged ‘Floating interest 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 ...
Hybrid Mortgages – Good or Bad?
The Globe and Mail ran a couple of articles recently on hybrid mortgages in Canada so I thought I would weigh in on the subject. The first article they wrote last week spoke of the advantages of a hybrid mortgage and how it can help guard against rising interest rates. The article was quite short and did not go in to much detail on how the hybrid mortgage actually works. The Globe then followed up with a second article yesterday quoting a mortgage broker and talking about some of the pitfalls. What is a Hybrid Mortgage? So what is a Hybrid Mortgage and how does it work? A hybrid mortgage is basically the love child of a variable and fixed rate mortgage. The client can choose how much of their mortgage to set at a fixed rate and how much to allow to float at a variable rate. The logic behind this product is it will help protect you against rate increases with the fixed ...
