Since the beginning of spring we’ve seen many changes with rates and the way banks handle new borrowers. Some are becoming more strict with their requirements while others are incentivizing new mortgages.
Here is a quick recap:
- The Central Bank lowered its key interest to 0.25% and banks followed by decreasing their prime rates, affecting variable and line of credit products.
- While purchase mortgage applications slowed down, banks saw up to 300% increase in refinance applications.
- Following the spike in demand for refinancing, banks increased their rates.
- Now we are seeing fixed and variable rates going down again.
With so many changes, many of my clients are reaching out to me and asking what they should do. Well, as always, it all depends on your unique circumstances. I broke it down to 3 main scenarios:
- I am a variable rate mortgage holder.
- I am a fixed rate mortgage holder.
- I was planning to buy a property and now wondering whether it is a good time to buy.
I am a variable rate mortgage holder.
Good for you! You have definitely seen your interest costs going down in the past 2 months. Some of my clients with large variable rate discounts are seeing rates below 2%. So the conclusion is – if you are a variable rate mortgage holder just stay where you are and enjoy your low interest rates. UNLESS, you have other debts to consolidate. Variable rates have low prepayment penalties so it is always a good idea to explore your options and see how much you will save by refinancing and consolidating your high interest debts.
I am a fixed rate mortgage holder.
Generally, the biggest drawback of fixed rate mortgages is higher prepayment penalties. But since fixed rates have been dropping, if your current fixed rate is above 3%, it is a good idea to explore the option of restructuring your mortgage.
Here is a quick breakdown of how one of my clients got her mortgage 3 years ago. She will be saving over $16,000 by refinancing her fixed mortgage at a lower rate (numbers are rounded up for simplicity).
After refinancing with 2.64% interest rate instead of 3.69%:
Client chose to accelerate her payments (to keep it similar to what it was before) which allowed her to contribute an extra $250.58 towards her principal balance. As you can see, after 5 years she will be saving over $16,000 in interest cost.
To conclude, if your fixed interest rate is above 3% and/or you have other high interest debts to consolidate, feel free to reach so my team and I can help you calculate your savings.
I was planning to buy a property and now wondering whether it is a good time to buy.
Are you looking for something long term? If so, it is a good idea to be prepared and know exactly what your budget is or what actions you need to take to reach your desired purchase price. We will see more properties coming on the market and it will give you an advantage if you are prepared to make a move. In short, get pre-approved to know exactly where you stand and what mortgage you would qualify for!
My next article will be dedicated to people wondering wherever it is a good time to buy a new home or an investment property. Stay tuned. =)