Comments on: The Mortgage Debate http://blog.canadian-dream-free-at-45.com/2009/05/19/the-mortgage-debate/ A Blog About Early Retirement and Happiness Thu, 09 Sep 2010 12:44:27 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Canadian Dream: Free at 45 » Blog Archives » Killing the Mortgage http://blog.canadian-dream-free-at-45.com/2009/05/19/the-mortgage-debate/comment-page-1/#comment-26634 Canadian Dream: Free at 45 » Blog Archives » Killing the Mortgage Wed, 27 May 2009 13:14:43 +0000 http://blog.canadian-dream-free-at-45.com/?p=703#comment-26634 [...] after getting a new mortgage I’ve been flirting with the idea of paying it off completely over the next five years.  That [...] [...] after getting a new mortgage I’ve been flirting with the idea of paying it off completely over the next five years.  That [...]

]]> By: Traciatim http://blog.canadian-dream-free-at-45.com/2009/05/19/the-mortgage-debate/comment-page-1/#comment-26060 Traciatim Wed, 20 May 2009 12:06:27 +0000 http://blog.canadian-dream-free-at-45.com/?p=703#comment-26060 AdamW, I thought the same thing about the 10 year at this point but the fine folds over at Canadian Mortgage Trends set me straight. You can take a look at their post over at http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2009/05/fixed-mortgages-10-year-vs-5-year.html To sum it up, if the spread between a 5 year and 10 year rate is 1.5% the 10 year historically only came out better than the 5 year about 6% of the time. Now, this may be one of those times, but that's not very good odds. AdamW, I thought the same thing about the 10 year at this point but the fine folds over at Canadian Mortgage Trends set me straight. You can take a look at their post over at http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2009/05/fixed-mortgages-10-year-vs-5-year.html

To sum it up, if the spread between a 5 year and 10 year rate is 1.5% the 10 year historically only came out better than the 5 year about 6% of the time. Now, this may be one of those times, but that’s not very good odds.

]]> By: Canadian Dream http://blog.canadian-dream-free-at-45.com/2009/05/19/the-mortgage-debate/comment-page-1/#comment-26059 Canadian Dream Wed, 20 May 2009 11:42:34 +0000 http://blog.canadian-dream-free-at-45.com/?p=703#comment-26059 FT, I plan to pay off the mortgage in about six years or so. I'm going to keep investing for another year or two and then switch gears to killing off that mortgage as fast as possible. Everyone else, Thanks for the links and stories of other people's decisions. It's always interesting to see what how everyone would handle something like this. Tim FT,

I plan to pay off the mortgage in about six years or so. I’m going to keep investing for another year or two and then switch gears to killing off that mortgage as fast as possible.

Everyone else,

Thanks for the links and stories of other people’s decisions. It’s always interesting to see what how everyone would handle something like this.

Tim

]]> By: AdamW http://blog.canadian-dream-free-at-45.com/2009/05/19/the-mortgage-debate/comment-page-1/#comment-26016 AdamW Wed, 20 May 2009 01:03:39 +0000 http://blog.canadian-dream-free-at-45.com/?p=703#comment-26016 It's funny you're posting about this today as I was just helping a friend out with some mortgage calculations. Firstly RBC, TD & BMO offered my friend 3.65% so ask your bank to match that. I was helping my friend decide between a 5 year fixed at 3.65% or the 10 year fixed at 5.25% ... I too believe that inflation is going to be a serious concern 3-5 years out and that interest rates will be a good deal higher. If inflation is in the 6-9% range it's very possible that when your 5 year term is up you'll be renewing at a new 5 year rate that is higher than 7% ... if that is the case then the 10 year 5.25% makes the most sense from a long term planning approach. As rates have nowhere to go but up in the next 5 years I think it's safe to assume that going variable right now is not the right move! Look into a 10 year ... run the numbers, it might be a better option! It’s funny you’re posting about this today as I was just helping a friend out with some mortgage calculations.

Firstly RBC, TD & BMO offered my friend 3.65% so ask your bank to match that.

I was helping my friend decide between a 5 year fixed at 3.65% or the 10 year fixed at 5.25% … I too believe that inflation is going to be a serious concern 3-5 years out and that interest rates will be a good deal higher. If inflation is in the 6-9% range it’s very possible that when your 5 year term is up you’ll be renewing at a new 5 year rate that is higher than 7% … if that is the case then the 10 year 5.25% makes the most sense from a long term planning approach.

As rates have nowhere to go but up in the next 5 years I think it’s safe to assume that going variable right now is not the right move!

Look into a 10 year … run the numbers, it might be a better option!

]]> By: Adam http://blog.canadian-dream-free-at-45.com/2009/05/19/the-mortgage-debate/comment-page-1/#comment-25997 Adam Tue, 19 May 2009 21:03:57 +0000 http://blog.canadian-dream-free-at-45.com/?p=703#comment-25997 @Hazy: Yes, you can still make extra payments on most fixed rate options. I am with RBC and I can make up to double my payment every month as well as 15% annual anniversary lump sums. With my existing term, I can also skip a month (should I ever need to) for every double up-payment I made. I can make two double up payments and consider those part of my emergency fund. If I don't use those two months, they save me interest payments, if I need them in case of a sudden job loss etc, I can skip an equivalent number of months. @Hazy:

Yes, you can still make extra payments on most fixed rate options. I am with RBC and I can make up to double my payment every month as well as 15% annual anniversary lump sums. With my existing term, I can also skip a month (should I ever need to) for every double up-payment I made. I can make two double up payments and consider those part of my emergency fund. If I don’t use those two months, they save me interest payments, if I need them in case of a sudden job loss etc, I can skip an equivalent number of months.

]]> By: zeromoney http://blog.canadian-dream-free-at-45.com/2009/05/19/the-mortgage-debate/comment-page-1/#comment-25995 zeromoney Tue, 19 May 2009 20:16:47 +0000 http://blog.canadian-dream-free-at-45.com/?p=703#comment-25995 this is really a no-brainer. Rates are supposed to hold until june of 2010 (according to the bank of Canada a few weeks ago) after that there's almost a 0% chance that they will go down, if they go up even 0.25% you've already made the right decision. I got really lucky and picked up a variable rate last september for prime - 0.76% for 5 years. My current rate is 1.49% !!! pretty incredible. But if I were signing up for a new mortgage now, fixed at 3.75 for 5 years would be the way to go. I would even consider fixed at 4. something for 10 years if it were offered. this is really a no-brainer. Rates are supposed to hold until june of 2010 (according to the bank of Canada a few weeks ago) after that there’s almost a 0% chance that they will go down, if they go up even 0.25% you’ve already made the right decision.

I got really lucky and picked up a variable rate last september for prime – 0.76% for 5 years. My current rate is 1.49% !!! pretty incredible. But if I were signing up for a new mortgage now, fixed at 3.75 for 5 years would be the way to go. I would even consider fixed at 4. something for 10 years if it were offered.

]]> By: Traciatim http://blog.canadian-dream-free-at-45.com/2009/05/19/the-mortgage-debate/comment-page-1/#comment-25984 Traciatim Tue, 19 May 2009 18:32:15 +0000 http://blog.canadian-dream-free-at-45.com/?p=703#comment-25984 I made that decision about 2 years ago, and ended up on a 5 year fixed at 5.09%. So far it would have been much better to go for the variable, but who know what will happen over the next 3 years. Hopefully things don't go to crazy and come 3 years from now things will be hovering back near the 5% range or lower. If not, maybe I'll switch to the variable depending on how things are looking at the time. I made that decision about 2 years ago, and ended up on a 5 year fixed at 5.09%. So far it would have been much better to go for the variable, but who know what will happen over the next 3 years. Hopefully things don’t go to crazy and come 3 years from now things will be hovering back near the 5% range or lower. If not, maybe I’ll switch to the variable depending on how things are looking at the time.

]]> By: Hazy http://blog.canadian-dream-free-at-45.com/2009/05/19/the-mortgage-debate/comment-page-1/#comment-25977 Hazy Tue, 19 May 2009 16:52:56 +0000 http://blog.canadian-dream-free-at-45.com/?p=703#comment-25977 One thing I didn't like about fixed rates is that it also meant the payments were fixed. I couldn't pay off the mortgage fast enough. Or do they allow you to make extra payments these days? One thing I didn’t like about fixed rates is that it also meant the payments were fixed.
I couldn’t pay off the mortgage fast enough.
Or do they allow you to make extra payments these days?

]]> By: Canadian Money http://blog.canadian-dream-free-at-45.com/2009/05/19/the-mortgage-debate/comment-page-1/#comment-25974 Canadian Money Tue, 19 May 2009 16:08:34 +0000 http://blog.canadian-dream-free-at-45.com/?p=703#comment-25974 Better data for comparison...link to 5 year average mortgage rates in Canada. Up until 2008, a rate near 5 percent for a five year mortgage was the lowest since 1951. http://www.bank-banque-canada.ca/pdf/annual_page57_page58.pdf Better data for comparison…link to 5 year average mortgage rates in Canada.

Up until 2008, a rate near 5 percent for a five year mortgage was the lowest since 1951.

http://www.bank-banque-canada.ca/pdf/annual_page57_page58.pdf

]]> By: Canadian Money http://blog.canadian-dream-free-at-45.com/2009/05/19/the-mortgage-debate/comment-page-1/#comment-25971 Canadian Money Tue, 19 May 2009 15:07:40 +0000 http://blog.canadian-dream-free-at-45.com/?p=703#comment-25971 Some historical perspective...a link to some Bank of Canada Prime Rate history. The last time period the prime rate fell below 5 percent was the late 1950s. http://www.bank-banque-canada.ca/pdf/annual_page66_page67.pdf Some historical perspective…a link to some Bank of Canada Prime Rate history. The last time period the prime rate fell below 5 percent was the late 1950s.

http://www.bank-banque-canada.ca/pdf/annual_page66_page67.pdf

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