[Goodyer]

Hey UT community,

I bought a place in fort york in april and its almost closing time for the purchase. Does anyone have any advise regarding fixed vs variable?

I have a preapproved 5 year fixed rate with ING @ 3.69% which to my understanding is good. Also today variable 2.65% from monster mortgage who I am going with

My understanding of the math behind the mortgage isnt the best and I am hoping some people on this forum might be able to give some insight on how fast the variable rate could _possibly_ climb and if its still better to go with variable

If anyone has any input for me this would be greatly appreciated! Thanks!

 

[carturo15]

in the last BOC meeting they advised the rates would not move at least until mid 2010, that is when they are expecting an economy recovery. if the world economy improves and inflation raises in Canada, you can expect mortgage rates going up to 5,6 or 7%, like at the end of 2007 when we had 1x1 with us dollar and that can happen either within the next 2 years or maybe it won't happen for the next 4 or 5 years. That's very difficult to estimate

My advice to you, if you expect to sell you place before summer or end of 2010 go with variable, but if you are planning to stay a long time in that place go with the fix rate, 3.69% for 5 years is excellent.

 

[daveto]

I'd suggest you go here for more info on mortgage rates.
http://www.canadianmortgagetrends.com/

Also, I point out that you have a fixed rate which is 15% below the current best offer in the market, whereas your variable rate is par with the market. As such, if I were you, I'd go with the fixed rate. my 2 cents.

 

[Goodyer]

My advice to you, if you expect to sell you place before summer or end of 2010 go with variable, but if you are planning to stay a long time in that place go with the fix rate, 3.69% for 5 years is excellent.

Sorry I should have specified. The unit will be for personal living, but in the future it will become a rental property.

I'd suggest you go here for more info on mortgage rates.
http://www.canadianmortgagetrends.com/

thanks! ill give this a read tonight

 

[cdr108]

I have a preapproved 5 year fixed rate with ING @ 3.69% which to my understanding is good. Also today variable 2.65% from monster mortgage who I am going with

With only 1.04% difference between a variable and fixed, i would go with the assurance of a fixed.

what do you think will happen with interest rates in the next five years?
my guess is that 1.04% gap will be closed and surpassed quickly.

 

[cabbagetowner]

if you can bear the risk i think it's better to go variable. there are only a few times in history that fixed has performed better. however if you're the type that loses sleep over things like this - go fixed.

 

[w.ll.am]

if you can bear the risk i think it's better to go variable. there are only a few times in history that fixed has performed better. however if you're the type that loses sleep over things like this - go fixed.

I have to disagree with this on the basis that mortgage rates can't go any lower and since they will change they can only go up. You are pretty much guaranteed that a variable will go above the 3.69 in five years and for at least 3 of them and I would bet on 4. This is one of those times that you can get in at the fixed rate that will absolutely perform better than a variable.

 

[simuls]

I'm with w.ll.am on this one. Variable works if there's room to move both ways, but with mortgage rates where they are the only real side is up. Go with the fixed and then relax for the next 5 years and try to pay down the principal as much as possible because chances are when you go to renew, your interest rate might be as much or more than double that 3.69% rate.

 

[Eug]

if you can bear the risk i think it's better to go variable. there are only a few times in history that fixed has performed better. however if you're the type that loses sleep over things like this - go fixed.

The guy who did that study said a few months back that this is one of those times in history where he thinks fixed might make more sense.

If it were me, at 3.69% I'd most definitely lock into a fixed 5-year. Seems like a no-brainer to me (assuming he actually plans on living there for 5 years).

 

[Canuck]

We locked into a 3.65% 5-year fixed. We with fix because:
a) I like to know what my payments are going to be, and not worry about every rate spike over the next 5-years
b) There's not a lot more room to go down, as such it seems very very probably the variable rate will rise above my locked-in fixed rate - I believe we won't see this happen until 2011 though.

 

[cabbagetowner]

The guy who did that study said a few months back that this is one of those times in history where he thinks fixed might make more sense.

If it were me, at 3.69% I'd most definitely lock into a fixed 5-year. Seems like a no-brainer to me (assuming he actually plans on living there for 5 years).

this might be one of those times, but nothing prevents you from subsequently locking in a variable. (i think)

i hold multiple mortgages and spread the risk by getting both fixed and variable. my variable has outperformed my fixed every time. the savings over the term of 5 years is considerable. but if you're able to lock in less than 4% then i think it's worth the "premium" for the safety.

 

[Eug]

this might be one of those times, but nothing prevents you from subsequently locking in a variable. (i think)

i hold multiple mortgages and spread the risk by getting both fixed and variable. my variable has outperformed my fixed every time. the savings over the term of 5 years is considerable. but if you're able to lock in less than 4% then i think it's worth the "premium" for the safety.

You could also hedge your bets by doing both on the same property. Split your one mortgage between fixed and variable.

I may do that come renewal time in 5 years.

 

[nfitz]

This one of those times that you can get in at the fixed rate that will absolutely perform better than a variable.

Not absolutely. If variable rates stay where they are for another couple of years, and then move up a percent for another couple of years, before returning to normal ranges, then at your 5-year renewal point, you'd have been better off to stay variable.

Though part of the reason that there is any question, is that variable rates are currently about prime plus 0.5%. With prime at 2.25% then that's about 2.75%. Not very long ago, you could get prime minus 0.9% ... and those of us that did are now paying 1.35% (for another 3 years!). So variable rates are running about 1.4% higher than they have in recent years.

I might consider a fixed rate if I was renewing today; but it's very unusual that it ever pays off in the long-term. Personally, I'm very happy having gone for variable; I would be paying over 5% if I had gotten a fixed-rate 2 years ago, compraed to the 1.35% I'm paying now.

 

[taal]

So the backs are moving up their rates now ... what are peoples thoughts on this?

To lock in or stay variable? thoughts anyone?

 

[nfitz]

At this point I'd go variable ... you know the Bank of Canada isn't going to move the bank rate for a while, as that would only increase the Canadian $ even more; I might be tempted to go for something short-term ... 6 months or so ... as though prime won't drop from 2.25% ... the banks are showing signs of dropping their variable rates ... and might start getting back to the prime minus somethign that they did in the past.