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Tuesday, July 27, 2010

Is it time to renew your mortgage?

Today, an article in the Vancouver Sun entitled "
With low interest rates, is it time to reconsider your mortgage?" suggested that people renew their mortgages now before fixed and variable rates go up as expected over the next year. Although there is a penalty for early renewal , often 3 months interest, it may be worthwhile. The article quotes a local Invis mortgage broker who discourages people from going with a variable rate mortgage. He says that the terms change. This is not true. If you negotiate a variable rate mortgage at Prime rate minus .60 you get this rate for the whole 5 year term. I'm not sure why he made this remark.
Fixed rates are still recommended for first time home buyers but an experienced home buyer can easily manage variable rates going up and down. How far up can they go? Economists expect the rates to go up by 2% between now and 2011 and then plateau. They have already gone up by .5% and stand at 2.75%. With the discounted rate, mortgage holders are paying 2.15% Even if they go up by another 1.50% these people will only be paying 3.65% !
Some of you may be worried about monthly payments going up. There's a simple strategy to compensate for this. Pay more now. If your expected payment is $800 bi-weekly, make it $1000. You will pay down your mortgage at a much faster rate and when the rates go up over the next year you will already have paid down the principal and be in a much more secure position. If you are already making mortgage payments based on 5% or more, you will be able to enjoy a discounted rate and pay off your mortgage faster.
It's a win -win situation. If you need more details or want to discuss your particular situation, call me at 403-836-1201 or email me at dcooke at mortgagealliance dot com. Sorry, I have to put my email address this way to avoid spammers.

Read more: http://www.vancouversun.com/entertainment/With+interest+rates+time+reconsider+your+mortgage/3325562/story.html#ixzz0uu7YDMQR
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