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Mortgage rate...thoughts?

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15K views 21 replies 13 participants last post by  mrgender  
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#1 · (Edited)
Hi everyone
I'm in the market for a mortgage, bought a new house that is closing in 3 months. I am looking at variable mortgages and was refered to this website in my research:
http://www.ratebot.ca/lowestrates.php
It has several no name companies selling mortgages e.g. valueland mortgages which is offering a 3 yr closed at 1.85% and truenorth which is offering a 2.1% rate on a 4 year variable closed. These beat what is being offered by the large FIs by a good .3-.4% so very attractive for me. My question is how trustworthy are these companies? Since i've always gone to the big banks for my mortgage, i'm concerned if i can depend on them...are there any risks of going with small companies such as these? What are the potential downsides, if any?
 
D
#4 ·
Oldroe said:
You need to ask for a better rate at the major banks.
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Agreed. The big banks know what the mortgage companies are offering and if you pit them against eachother, the big banks will usually match rates for you.

If you are worried that these mortgage companies will go under, don't worry. If it does happen your terms and conditions stay the same for the remainder of the term of your mortgage, you will just make payments to whichever financial institution takes over your mortgage business.

Mortgages are federally legislated in Canada (i.e. how interest is calculated and applied) and is consistent from lender to lender.

Out of curiosity, why variable vs. fixed rate?
 
O
#6 ·
So after you negotiate the best rate keep your payment at the advertised rate, this will get you 1 exacter payment per year (approx).

The best negotiated rate for me was .93 off the advertised rate and it's all based on credit rating and cash. At the time I had twice the money in that bank in cash to pay the mortgage.

And also make it clear you will get up and walk.

I will find a site that will give you all mortgage rates for banks credit unions ect. next week.
 
C
#8 ·
Dana said:
Mortgages are federally legislated in Canada (i.e. how interest is calculated and applied) and is consistent from lender to lender.
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… to a certain degree … however, the Bank Act applies only to certain specified financial institutions … private mortgages, such as might be available through some mortgage brokers, or directly between lender and borrower, are not necessarily held to the same standards.

financeguru said:
I have always got a variable mortgage and found always making less as compared to a fixed mortgage. I believe there are studies out there that prove unequivocally that variable mortgages beat fixed mortgages 9 out of 10.
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Unequivocally?? ... I'd be willing to wager that none of those studies examined a time period that STARTED with rates at multi-generational lows.

You may be right that the inevitable rise in rates might be slow to take hold, and might be very gradual ... or you might not ... its a gamble, but it sounds like you're going into it with your eyes open.
 
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#13 ·
Dr.V said:
There is ample evidence
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Milevski’s studies did not examine any time period that STARTED with rates at multi-generational lows ... it is one thing to look backward from 2010 and conclude that during a period in which rates fell or remained unchanged more often than they rose, variable was the better choice most of the time ... it is quite another to look forward from 2010 and be confident that the same will hold true in the future.

This is not a case of “this time its different” ... its merely that the results are predictable when you study time periods during which upward rate movements were in the minority. I don’t think anyone is implying that a fixed-rate mortgage is a sure-fire anything ... but it certainly has less chance of being a losing strategy than Milevski’s studies would suggest.

Personally, I've done well with variable rates, but there is ZERO chance that rates will continue to fall in the next 15 years to the degree they fell in the past 15 years. ... fortunately, its not a decision I have to make, ever again.
 
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#17 ·
cardhu said:
Milevski’s studies did not examine any time period that STARTED with rates at multi-generational lows ...
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But it's largely irrelevant what rates are at right now -- it's a question of how quickly they go up, and by how much. That's why it's such a notoriously difficult thing to predict. (I think that it's a foregone conclusion that rates are going to go up -- I'm not debating that.)

Cannon Fodder's spreadsheet may help readers to make some reasonable guesses as to which strategy they think will be best.


K.
 
#14 ·
Interesting discussion!

I am in the process of getting a pre-approved mortgage and have been debating between the fixed and variable mortgage.

I'm thinking of taking a variable mortgage for one year or so, then switching to fixed if prime rises.
 
H
#21 ·
I'm thinking I may do the same thing. My mortgage renewal comes due on May 1.

- VRM @ 1.8% (5 yr term/w option to lock into a 3 year fixed at anytime)
- Payments at the 5 yr fixed rate
- Accelerated Bi-weekly payment schedule
- Lump sum @ available anniversaries
 
C
#18 ·
Dr_V said:
... it's largely irrelevant what rates are at right now [/I].
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Well, yes and no ... I agree that rates do not need to go down for a variable rate to come out ahead of a fixed rate ... rates can remain level, or rise very slowly, or even rise quickly toward the end of a term, and still acheive the same outcome ... in that respect, I agree its a question of how quickly and by how much rates rise.

My point is, during the time periods studied by Milevski, if you look at month-to-month rate patterns, rates either stepped downward, or remained level, more often than they went up ... so it should not come as any great surprise that variable rate came out ahead of fixed rate, more often during his study periods ... but (and here is where it remains relevant where rates are today) in the immediate future, downward steps in rates are not really in the cards, so when you take those downward steps off the table, what are you left with? Only upward steps, or rates remaining level. And that is bound to change the probabilities, as compared to Milevski's findings.

That's all I'm saying ... the argument in favour of variable is not nearly as compelling as it once was.

The spreadsheet you linked to is interesting, and nicely demonstrates the timing and scale of rate increases that would be necessary for a fixed rate to come out ahead.
 
F
#19 ·
cardhu said:
My point is, during the time periods studied by Milevski, if you look at month-to-month rate patterns, rates either stepped downward, or remained level, more often than they went up ...
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How can you say that? I have not looked at his work in detail, but i would imagine that if he took a reasonably large sample time period, then ups and downs would cancel out.
 
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