what kind of mortgage to get??

[agallag]

Thanks for that tjalfe, I thought that was obvious when I was making my point. Locking in for 25 years, if it was even offered, would be offered at a very high interest rate.

Obviously if they'd let you lock in at 5% for 25 years, you'd be stupid not to.

Actually, I just went to ING again, and they're offering 10 years for 5.89%. That's very generous compared to the 7.95% the big banks advertise.

[Tjalfe]

Originally posted by agallag
Thanks for that tjalfe, I thought that was obvious when I was making my point. Locking in for 25 years, if it was even offered, would be offered at a very high interest rate.

Obviously if they'd let you lock in at 5% for 25 years, you'd be stupid not to.

Actually, I just went to ING again, and they're offering 10 years for 5.89%. That's very generous compared to the 7.95% the big banks advertise.

No problem

Presidents choice financial offered 10 years at 5.8% .. would you concider that, or still go with variable?

[agallag]

Personally, I'd probably still go variable. But it's a close decision, so do what you feel is right for you.

[Tjalfe]

I will see if they offer a variable with a lock in at any time option and if not, probably the fixed 5 year for 4.85% ( if nothing else to keep my girlfriend from freaking out, she is a tad worried about the variable rate on )

[agallag]

Royal offers a capped variable mortgage. Basically a variable rate with a pre-set maximum. It's a 5 year closed term though, so you don't get the option of paying it out at any time like with most variable mortgages. Something to consider.

http://www.rbcroyalbank.com/products/mortgages/ratecapper.html

[KvHagedorn]

Well, I just checked around to find what a 30yr fixed rate mortgage with no points would go for, and found many in the 5-5.5% range in my area..

http://www.bankrate.com/brm/rate/mtgRsearch_product.asp?params=TX,801,601

[Helevitia]

Originally posted by tjalfe
I will see if they offer a variable with a lock in at any time option and if not, probably the fixed 5 year for 4.85% ( if nothing else to keep my girlfriend from freaking out, she is a tad worried about the variable rate on )

Dude, seriously, do yourself a favor. Get a 30 yr fixed. You are gambling with your money and your future if you don't. You will thank me later. Like I said earlier in this post, there are very few reasons to get a variable interest loan and it sounds like you don't fit any of those criterias. Also, IF you MUST get a variable interest loan, be sure and use that extra $$$ and invest it.

Do some more homework so you can see the exact dollar differences between variable and fixed. Pick out 5 different what if scenarios on the variable interest loans and compare that to the fixed. Also, remember we are at an all time low, we can only go up. You WILL pay more eventually.

And last, I have a 30 yr fixed at 5.375%. You will probbly not hear in the next 30 years or more of someone getting that low of a fixed interest rate. You can get that same rate right now.

Dave

[schmosef]

Dude, you can't get that in Canada. It's unheard of to get a 30 year mortgage up here. The banks won't offer it unless you demand them to and the rate you'll get will be like 12-15%.

The standard here is to negotiate 5 years at a time towards a 25 year amortization. Every 5 years they want you to renegotiate because the banks are hoping that rates will go up.

[Helevitia]

Originally posted by schmosef
Dude, you can't get that in Canada.

Well, whatever fixed rate you can get in Canada is probably better than variable.

[Helevitia]

Originally posted by schmosef
Dude, you can't get that in Canada. It's unheard of to get a 30 year mortgage up here. The banks won't offer it unless you demand them to and the rate you'll get will be like 12-15%.

The standard here is to negotiate 5 years at a time towards a 25 year amortization. Every 5 years they want you to renegotiate because the banks are hoping that rates will go up.

Interesting....let me look at it a little closer.

[schmosef]

Well, whatever fixed rate you can get in Canada is probably better than variable.

It's not. The Banking Industry in Canada is a scam. They don't really compete with each other. It's only with foreign competition like ING and boutique upstarts like Presidents Choice that they're beginning to wake up.

[Helevitia]

Wow, after looking at it, you guys in Canada are all ****ed. I don't know what to tell you except the 10 yr fixed @ 5.8% still looks like the best option.

[schmosef]

The reason Canadian banks offer so many variations on the five year theme (variable, fixed, capped, open closed, blah, blah) is because they are preying on people's fears. That's their stock and trade. There's no one solution that works for everyone. You have to take an honest look at your own financial situation and make the best choice possible given what you know.

There's a lot of stress involved in a variable rate mortgage. My business partner bought his townhouse with a variable rate mortgage with an option to lock in. It wasn't the right choice for him because he has zero tolerance for risk. He started out paying less than 5% and ended up locking in at around 7% when the rates took a little bump. He couldn't take the stress and now he's paying more because if he had waited, he'd be paying less than 4% today. So for him, he should have started with a fixed rate mortgage that he could have gotten for about 5-6% at the time. It wouldn’t have been the “best” rate at the time but at least he would have been comfortable with it.

Do you see what I'm saying? He got bad advice from a broker as to what type of mortgage to get. He was stressed all the time until he locked in. So he should have started out with a fixed rate. But that's not the solution for everyone. If you can handle the stress, if you’re not stretching every dollar to make your monthly payments, a variable could be right. It depends on the individual.

[schmosef]

Originally posted by Helevitia
And last, I have a 30 yr fixed at 5.375%.

Dude, that's exceptional. With more and more of my customers not located in Toronto, I might just have to find a place where I can get a mortgage like that.

[Umfriend]

It's not exceptional in the US, most mtgs are 30 yr fixed with full prepayment/refinancing options with the customer.

If I understand it correctly, in Canada, you can get a 5yr or 10yr fixed and after that 1 year revolving? But after say 10 years, you can prepay and refinance into another 10yr loan? Is that how it works?

If you are planning to pay down faster even on the 10yr rate scenario, then yes, variable would prolly be the best option. Obviously, your income supports a higher loan and/or interest anyway, so you can take a gamble. Mortgage rates have been very high in the early 80s, but not for a very long time, just 3 years I think.

You might even consider saving some liquiidy into INGs savings account. It does not pay as much as variable mortgage rate, that alas is a loss giving position, but it does improve your liquidity position should rates bump sky high for a few years.

Finally, if there is any tax break for mortgage interest, it may be relevant, i.e. in the Netherlands we can deduct mortgage interest _without_ having to net interest income on savings accounts. The higher your tax bracket, the less loss in that liquidity set-up.