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Fixed versus Variable Penalties
I sat there with tears in my eyes and a lump in my stomach and felt like a complete and utter failure. My husband and I were parents to a beautiful one year old and we had decided for me to stay home since daycare was going to cost more than 3/4 of my income. We were young and we were in debt. The value of our house had risen significantly and we wanted to use some equity to pay off our debt and sleep better at night. Everything was fine, we were approved without problem, then the bomb was dropped on us . .we found out that we would have to pay almost $8000 in penalties to break our mortgage! $8000!!! We didnt have that kind of money! We were doing our best but had not realized how expensive a baby on one income was (oh, how naive we were). How did this happen? Were smart people who read all of the paperwork before we signed it (so we thought). If wed had a variable rate mortgage, our penalty and administrative fees would have been less than $1000. We chose a five year fixed rate because thats the smart thing to do, interest rates are always changing, and you dont know what the rates are going to look like next year. Ive since found out that interest rates are not as scary as the news portrays them. The Bank of Canada meets 7 - scheduled in advance -times each year to look at the prime rate. The prime rate has increased by more than 0.25% only ONE time in the last ten years. Were Canadian! We dont like shocks! Slow and steady could be our motto! Thankfully the Bank of Canada likes to be boring, dependable, and stay the course. #BoringIsSexyInCanada I never want anyone to feel like I felt that day. Understanding your options is a top priority for me. I translate industry speak into regular English so that my clients understand ALL of their options and the possible outcomes of their choices. Ill ask you lots of questions to fully understand your needs and meet those needs with a loan from one of the many lenders I deal with. Straight answers, no surprises, an expert on your side.
Scary Headlines and Simple Math
Todays scary headline and body come fromStress tests, foreign buyers and higher rates likely to impact housing market in 2018 (CBC). Higher rates The stress tests are based on the notion that interest rates are set to rise, and theres ample evidence to suggest thats likely to come true. After sitting on the sidelines for the better part of a decade, the Bank of Canadahiked its benchmark interest rate twicelast year. After having a mini-panic attack, I looked into the data. 1. An interest rate increase of 0.5% in 2018 would increase payments on a $300 000 mortgage by only $80/ month.Honestly! Dont believe me? Use the mortgage calculator to your left or one found on every lenders web page. Ill wait for you to get back. ..... Hmmm, $80/month isnt so scary after all. And if your mortgage is higher that $300K? Do the math. Youll still most likely be able to afford your house. Rising interest rates are scariest for those living at the extremes and us Canadians tend to be a very conservative bunch. Conservative =boringmajority not at high risk. (#BoringIsTheNewSexy, #BorrowingLessThanWeCouldAffordTo). (Math side note: a 100% increase in rate only translates to about a 30% increase in payments! Painful, but doable for the majority.) 2. The BOC has only raised the rate by more than 0.5% in oneyear in the last ten years. (https://tradingeconomics.com/canada/interest-rate).Yes, weve been spoiled with low interest rates. I love this quote from the same article: (E)conomist Doug Porter at the Bank of Montreal says he expects the market will largely be able to withstand the impact of new stress tests, just as it has withstood other policy changes. Canadas housing market has defied the incessant talk of its imminent demise for years, Porter said in a recent report. Which is why this year, he expects the housing market to exceed expectations, even with the new tighter OSFI rules, yet again crushing the bears calls, if not their spirits. . Doomsday has been predicted for ages and has not arrived. It probably wont arrive this year either. Question the math in the headlines or have your friendly broker to explain it to you. We are the experts. Lisa