5 Year vs 10 Year Mortgage Terms

 Decisions, decisions.            

Choosing the 5 Year term at 2.89% is very tempting but I am telling my clients to take a good look at the 10 year term available at 3.69%.
My concern is what the rates will be in 5 years. A quick survey of my peers and lenders comes up with 4.75% to 5% as a probable rate.
A 5 year 2.89% 25 year am. mortgage carries for $1286. per month.
A 10 year 3.69% mortgage carries for $1401. per month. $115. more per month.

If you take the 5 year and come up for renewal with a balance of $234.557 and renew for another 5 years at our estimated rate of 5%,  you will pay $1541 a month. Choosing this scenario you will pay $90,205 in interest vs $86,859. in interest taking a 10 year term. Even the balance at the end of a 10 year term is $1796. less taking the 10 year term. These results will be even more amplified if you take accelerated Biweekly payments.
With the 10 year term you get rate security and savings.

Federal Government Wants Mortgage Rates to Rise

Today's Star says the Federal Budget announced in March contains a suggestion that CMHC may be limited in the future when it comes to insuring conventional mortgages. This will effect some Lenders fundings and they will have a difficult time doing their normal mortgage backed securities routine. As a result, their cost of funds will likely increase forcing up mortgage rates..
A few weeks ago, Jim Flaherty was accused of influencing lenders mortgage pricing by calling Manulife and Bank of Montreal suggesting they  cancel their special on the 5 year Mortgage.

All this because he thinks 2.89% is influencing buyers and mortgage seekers. Of course it is. So what?
In my Mortgage Broker Practice we see intelligent well qualified clients using these rates to buy a first home or a move up home. Its the best way to build wealth and avoid wasted rent payments.

The government should leave Canada's well run Banks and Mortgage Companies alone when it comes to pricing their products. The banks are highly profitable and don't mind helping consumers at these low rates.

Not all Mortgage Agents are equaly qualified

If you have chosen to work with a licenced Mortgage Agent or Broker, you should ask a few questions.
How long have you been in the mortgage business? And if only a few years, what did you do before becoming an agent? Were you in the Financial Services area?
How much business do you do in a year?
Do you do this full time?
What are your qualifications?

Here is why you need to know these answers.
It takes one week in a classroom or 6 weeks on line plus an exam to
qualify to apply for a Mortgage Agent license.
Other than a satisfactory criminal background check and a decent credit bureau
someone with any career background can become an agent and process mortgages
if a Principal Broker thinks they are suitable and will hire them.
Here is the issue. Getting a licence to sell and arrange mortgages does not mean the  agent knows very much about the business. They can be working part time in a completely different field and then the next month be a licenced mortgage agent.
Here is what a client needs to ask. If an agent is new, who is supporting them and reviewing their business?. Does this new agent have a Broker available to answer questions and provide advice?
The mortgage business is getting more complicated every year. A person must be full time and active to keep up on the new government policies and changes.
My advice is select an Agent or Broker with years of experience and  knows the business.

Ask the question. How Long? How much and what qualifies you to take care of me?


Bob Beach....BTW here are my answers. Over 30 years, 5000 mortgages arranged and still helping clients every day.

Two New Lenders Signed

This week I have added 2 new Lenders to our approved list.
What does this mean to our clients.  Both of these Lenders have an important Niche that Banks do not have!

Lender #1 will mortgage rental properties up to 80% financing and up to 5 Units.
This blows the Banks out of the water and at prime rates and np Brokerage Fee's

Lender #2 will approve mortgages for people who do not qualify for the required mortgage at this time. For example, a client works 20 hours a week but plans to go full time in the near future. This Lender will use the potential income. The rates are slightly higher than A lender rates but not obsene.

There has never been a more important time to have Mortgage Broker relationship.

Better than Bank Mortgage Rates

This past week, I arranged 3 mortgages for Burlington clients that had been to their own bank and then contacted me.
I each case I was able to arrange a mortgage suited to their needs and at lower rates than their own bank had quoted.
One client received a rate 20 bps below their banks best offer saving them $3000. in interest over the 5 year term.
It's also interesting that they were not offered alternatives such as a 3 year term or a 10 year term.
As I always say, its never been a more important time to have a Mortgage Broker relationship.

10 Year Mortgage Rate Special 3.79%

One of my preferred Lenders has reduced their 10 year fixed term mortgage to 3.79%.

I feel this term is good for many clients. Its portable, its assumable and you want have to think about a mortgage renewal 5 years from now.
 This mortgage comes with a free 12 month Home Warranty and amazing on line access to make your own changed the mortgage.
The payment difference between a 5 year mortgage and the 10 year make this a compelling product.

10 year at 3.79%. call me for details and special conditions

New A Lender

We had a visit from an old BDO friend this week who has joined an Lender just entering the A market.

The A market is the mortgage market occuppied by mostly banks.

This new Lender has some pretty impressive people in charge and I think they are going to do well in the market with a strong focus on common sense underwriting and serve.

 Follow me for more information.