Mortgage rates are LOW!

[ChristineDLC]

5 year fixed rates are as low as 3.60%! If you're in the last year of your mortgage term, it's a great time to refinance. Or if you're thinking of consolidating some debt into your mortgage, excellent time to do so!

Christine

www.christineherr.ca

[brunt]

Paying the least interest for loans that you have is always a good financial move.

Just take care not to get carried away like the Americans did and take out a larger loan for things that you want just because the rate is low.

A loan is almost always a bad idea. It can make sense for buying a house, but get the smallest loan possible at the lowest interest rate, then pay it off as quickly as is humanly possible.

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edit: Note that the first post was made by someone who supplies mortgages. While this is not really spam or advertising, and she has every right to post here along with the rest of us, keep this in mind. I always try to take into account biases from individuals from whom I get advice.

[janelcd]

I think message #1 is spam!

[ChristineDLC]

It's not spam.

and I agree with Brunt's comments.

Christine

[Zonny]

I'd also add, don't always believe the bank when they tell you how much mortage you can afford. If we'd listened, we'd have a bigger house but not a whole lot of money left over each month after the mortgage payments.

Z

[ashedfc]

Just because the bank is telling - How much mortgage you can afford!, doesn't mean one should go & get that size of mortgage. Everyone should access their affordability (kind of an individual's "Stress Test", low long can a person afford to survive without any income, or rather, how many months away from foreclosure a person is in case of financial distress), & only than to get into debt of whatever kind (mortgage /car loan/credit card/etc.etc).

The initial post (I believe) is to refinance, so the debt is already existing. She is not recommending to add a new debt. She has in fact, suggested to take advantage of lower Fixed rate & lock in this rate for 5yr at 3.6%. These rates are historic low, & it won't stay here forever.... Today morning 9AM Bank of Canada increased rate by 0.25%

Just a calculation :- $20000 balance on a credit card (which is relatively very common in North America & Western Europe), at a 3% minimum monthly payment costs $600/month, which is exactly the same monthly payment for a $144000 of mortgage at the above rate & 35yr amort. Now the same credit card balance when added to the mortgage makes $164000, however the monthly payment equals $685 (only $85 increase, which is much less than $600 per month).

Note # Keep in mind, there is no increase in debt, its actual redesigning of debt. The problem with our society is, when the Credit card goes down to Zero, people tend to forget basic financial planning "To Live within your means" & start piling the credit card debt again & again & again.

In my opinion - the problem is in consumer behaviour, not debt-restructuring, rather debt restructuring is the solution.

ASH
www.edfc.ca

[brunt]

It's not spam.

and I agree with Brunt's comments.

Christine

Hey Christine,

I agree with you about the original post not being spam. To tell you the truth, even though I have no need for a mortgage, the rates of late have almost knocked my socks off whenever I go into the bank.

Glad to see that you didn't take my post personally. I try to make a point to put a disclaimer when I make a post that I have a bias in the particular area.

I just have a habit of not asking a banker how much of a loan I need, or a car dealer if I need a new car, or a butcher if I should buy the ground beef or filet mignon. Just wanted to point out that as a supplier of mortgages, while you may be very knowledgeable in the area, you are in the business of giving mortgages. Not saying that you did anything wrong, it's just something that I am picky about noting.

[SmackUTwice]

Thanks.

Bought my house in... March or April. Locked it in at 3.19% (i think it was). So I am good!

[Scottlandlord]

I take a different approach.

I don't fear debt. I use it as a financial tool. Perhaps I think they way because I'm from a family that originated in a country where financial tools were unavailable.

Sure variable has gone up the past 3 BoC meetings. However, with unemployment up in Canada and the very real possibility of a US 'double dip' rates could remain where they are for a long time, or even be cut.

And my mortgage professional is offering deep discounts off Prime.

P -1 still looks good to me!

[ashedfc]

P -1 still looks good to me!

Is this available for a normal residential mortgage?????????? I seriously doubt. If it is ... that's the cheapest source of money. You are absolutely right !!!!!!!!!
If you can invest & grow your money more than your debt cost, you are always a winner.
This is exactly how wealthy make money. "They make money from money which was never theirs"
As long as the debt is servicable..........

[brunt]

I take a different approach.

I don't fear debt. I use it as a financial tool. Perhaps I think they way because I'm from a family that originated in a country where financial tools were unavailable.

Sure variable has gone up the past 3 BoC meetings. However, with unemployment up in Canada and the very real possibility of a US 'double dip' rates could remain where they are for a long time, or even be cut.

And my mortgage professional is offering deep discounts off Prime.

P -1 still looks good to me!

Yours is indeed a different approach. And it is not one with which I disagree, but in general, I still say that one should be careful about debt.

Going into debt for income producing equity is a good idea when done conscientiously, carefully and with a constant eye to the bottom line. But if one were to look at the non-mortgage debt taken on in the country, one would see that it is overwhelmingly taken on for things that simply should not have been bought from a dollars and cents standpoint.

I have a similar feeling about refinancing as well. At low rates, one may be tempted to take out a larger loan, and get that boat that you've always wanted and still have your payments decrease. This is the real temptation that most people face. And it is a mistake.

Another problem is using low interest rates as an excuse to buy a bigger house than you would have otherwise bought. This is a problem from a number of fronts, namely:

1) I believe that house prices will be lower five years from now than they are currently. If one buys a big house with dreams of the appreciation that we have had for the last fifty years, I believe that you are going to be sorely disappointed.

2) Governments at all levels are experiencing falling tax receipts in the face of increased expenses. This means that I believe that property taxes will continue to increase faster than inflation. And don't think that you will be saved by falling valuations yielding falling tax bills. The municipalities can up the mil rate by even more than the house values fell yielding a yet higher bill.

and last but not least,
3) A bigger house simply costs more to keep heated, repaired and filled with furniture. It is a huge mistake to only look at interest rates as the only cost of running a household.

In short, if you have the financial discipline, a basically bulletproof income stream, and the financial wherewithal to weather a mistake (in case you make one), then debt can indeed be a powerful tool. But if your ducks are not in a row, debt can and will be your biggest enemy. In your case, it allows you to run your business. But in the wrong hands, it can be a huge nightmare.

[SmackUTwice]

I bought my house for the price of a friend's debt when she passsed, so it's about $45 000 less than market value. The house would've went straight to me (with less than $40 000 left on the mortgage), but we discovered she had debt... crazy! So scrapped all my money together and put like 65% of it as a down payment. I danno what to think, when in 4 and a half years I have to re-new.... ah, lol.

[ashedfc]

So that's the reality. Its an Estate Sale.
Your Bargain is not market driven, its a special legal opportunity (not available to open market). You are lucky to get substantial discount below market.
For 4 &1/2 yrs from now when you have to renew, its too early to predict.
However, I still doubt your Prime less 1% mortgage............... if its done recently.

[SmackUTwice]

So that's the reality. Its an Estate Sale.
Your Bargain is not market driven, its a special legal opportunity (not available to open market). You are lucky to get substantial discount below market.
For 4 &1/2 yrs from now when you have to renew, its too early to predict.
However, I still doubt your Prime less 1% mortgage............... if its done recently.

Yes, lucky. It was on the market for a while but once I figured out I had enough money to "get my foot in the door" to real estate (as I'm a young, single mom and have been renting since moving out from mommy's, lol)... I got in there and was able to buy it for the price of the deceased's debt. If I had not bought it, what was left over after paying the debt with someone buying it for market value would have came to me. So taking all things into consideration, it was much smarter to buy this place than to have a bunch of money to put down at another place.

I don't have P-1%, I don't think, hmm... lol! I locked it in, 5 year term, in March or April when the rates were the lowest they had been since Dec 2009--month after she passed away--up until that point. I remember getting an email only days after finalizing everything saying the 5 year rate had gone up a bit. I forget what it was (I can go find out, but it really doesn't matter on SC, lol)... but it was 3.something %.

Real estate can be a scary world, hehe.

[Zonny]

Our variable rate mortgage was under prime for awhile, although this was a year or two ago. As I recall, it was -1.5 for about eight months, a promotional rate when we renewed our mortgage.

Z