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Hi everyone!
I just purchased my first home and thus it is first mortgage and I don`t know very much about this! Any advice would be very appreciated.
Which do you think is a better deal?
2.99% 5 year fixed rate at 25 years amortization.
or
3.99% 10 year fixed rate at 30 year amortization.
Really want to jump on the 2.99%, but worrying about what rates will be at in 5 years has me thinking about the 3.99%.
What do you think?:shrug:
Check your affordability: how much monthly payment you can do without affecting your lifestyle & budgeting needs. Mostly people look at only rates, while taking a mortgage. keep in mind lesser amortization period will increase the principal portion of your monthly payment.
As far as 10yrs is considered: We will for sure have another massive recession in the next 5yrs or 10yrs (or maybe sooner). So even if rates go up, the chances of rates coming back down again in much higher.
And lets say inflation kicks off & interest rates shoots up to double digit: that my friend, there's going to be massive defaults all over Canada, that Govt. will interfere to protect the mass home-owners financial calamity.
So, do the math, & check your affordability: Also keep in mind if you loose your job & the next job isn't coming so easily (than what happens).. since, its your first home, be extra cautious, apart from mortgage, property tax, etc, homeownership comes with a lot of surprising other bills.
2.99 % ..since most people change their house or mtg on an average every 4-5 yrs in Canada, not because they want to but because they are forced to due to life situations and emergencies.Quote:
Originally Posted by rainbowbrite19
Trust me you don't want to be locked in for 10 yrs as the PENALTIES will be HUGE, if you are forced to break your mortgage due to some unforseen circumtances in your life.
You might have to relocate for a job or some other financial or personal emergency might come up, forcing you to break your mortgage.
10 yrs is a really long time and lot of stuff can happen..IRD penalty will be huge, God Forbid if you have to break your mtg.
Go for the 5 yr term and make some pre payments towards your mtg if you can , so that the balance is even less when the time for renewal comes up.
Rainbow,
The 2.99 - 5 year term deals (from several banks)are generally Not a good idea. Here's why. . . (I just copied and pasted from another one of my posts the following)
The 2.99 mortgage offer that BMO currently is offering has serious restrictions that most people don't understand.
I always recommend for anyone to seek a mortgage brokers advice - It's Free! (except in bad credit situations)
One of the worst restrictions of the BMO mortgage is you cannot break the 5 year term. Here's why that is a bad thing. . . .
The majority of 5-year fixed mortgage holders break and/or add to their mortgage prior to maturity. There are endless reasons for this, including:
To allow for these possibilities, BMO’s Low-Rate mortgage "lets you" refinance and early renew.
- upsizing
- job loss
- separation/divorce
- death of an applicant, or
- refinancing to:
- get a lower rate
- get a lower payment
- make an investment purchase
- consolidate debt
- pay for medical expenses
- fund a child’s education
- pay for a renovation, or
- meet personal needs.
The downsides are:
For these reasons, having an escape route from your lender can often be essential.
- BMO may not have the rate, terms or features you desire at the time of refinancing.
- BMO **doesn’t have to offer you its best discretionary rates since it knows you can’t escape before maturity. **
- There are penalties to consider if refinancing. BMO might not be as compelled to negotiate on penalties and fees since you’re a **captive customer. **
- BMO is not obligated to early-renew or refinance you if you don’t meet its approval criteria.
TRUST ME, it's just not worth it. DOn't get sucked in to the sales pitches.
As for the 10 year, I happen to think it's an excellent option. . .and contrary to what many believe. . after 5 years, you only get dinged a 3 month penalty. HOWEVER, you should deal with a broker for this as they will protect your interests and make sure there are no hidden surprises.
Feel free to PM me if you have any questions.