Timing And The Current Mortgage Interest Rate
With the constant variations and shifts in the forces that manipulate current mortgage interest rates, it is not surprising that the right timing can make a significant difference to the amount you pay for a home loan. Many home owners are enjoying the current savings while mortgage rates current levels remain low, but there is little that is certain in today’s economic climate and they are unlikely to remain static for long. For this reason it can be of benefit to the potential borrower to lock in on a favourable rate, and to get this right requires timing.
To understand how and why the locking in facility works it helps to consider the alternative. For a potential borrower who has been following the movements in the current mortgage interest rate, the timing of their application will be at a point they consider the rate to be most favourable. They will complete their application and after a period of between a few weeks or months they will either be approved or declined the loan. If approved the rate used will be based on the current mortgage interest rate at that point, which could be far less favourable than at the time of application.
Obviously this is undesirable to the borrower who may end up paying more than expected for the loan. By locking in at the time of application the lender is obliged to guarantee the rates applicable at that point, regardless of any movements between then and the point of approval. This gives the lender some peace of mind and allows for improved financial planning by agreeing the relevant costs up front. This can of course also lose the borrower money if mortgage rates should suddenly dip after the time of locking in, but in most cases it is preferable to choose your moment rather than leave it up to fate.
Pick the Right Perks for your Adjustable Rate Mortgage
These are heavy days for Canadian homeowners. If you’ve been in your home even a few years, you’ve probably already enjoyed a modest climb in the value of your home. Even if you don’t intend to sell, it’s good to know that your real estate investment is doing well. But we’re also enjoying an environment in which mortgage rates have reached historic lows.
That combination — strong valuations and low mortgage rates — has an unprecedented number of Canadians looking for ways to capitalize on the great opportunities available to them.
Whether it’s to buy their first home, trade up, or take equity back out of their homes, Canadians are jumping at the opportunity to borrow at today’s rock-bottom rates.
While many homebuyers are reconsidering the value of fixed-rate mortgages to lock in those low rates, you should keep in mind that adjustable-rate mortgages – the darling of the dropping rate trend – can still offer real value to homeowners. It’s a matter of finding the right combination of mortgage features and options.
As banks have been joined by other lending institutions, we have seen our menu of ontario mortgage options grow accordingly – with some innovative new mortgage types now available to help Canadians take advantage of today’s unusual opportunities.
One of the most innovative mortgages we’ve seen in a very long time is a new adjustable-rate mortgage with some very compelling features. First, it’s based on an institutional rate benchmark known as Bankers Acceptance. Most of us are familiar with the rate benchmark known as Canadian Prime – and we are accustomed to assessing mortgage rates based on Prime. The BA, on the other hand, is the rate at which banks will lend money to one another – and it’s typically a lower rate (sometimes much lower) than the prime rate offered to a bank’s best customers. The new BA-based mortgage – compared to the best prime-based mortgage available – could have saved a mortgage client a bundle over the last several years, primarily because the prime rate tends to be “stickier” in an environment where rates are falling. Often, the more fluid, market-based BA rates deliver the rate change more quickly. The BA rate is no trade secret, by the way; pick up a copy of your favourite financial paper and look for the published money rates to find the Bankers Acceptance Rate.
But the attractive rate structure is not the only perk. The same BA-based mortgage – so welldesigned to help clients wring the last quarter point from their mortgage rate – now also comes with a rate cap which guarantees that your rate will never climb higher than 2.15% above the starting base rate – no matter what happens to rates during your mortgage term. There’s no worry about locking in too high because the rate is always adjustable down.
Only the ceiling is fixed. It’s a homebuyers’ dream:
A mortgage with limited upside and unlimited downside. If you’re thinking about buying a home this year, or you haven’t had your mortgage reviewed in the last several months, take the opportunity to get an expert assessment of your many options from a mortgage professional. It could be the best investment you’ll make this year!
Your Mortgage Could be a Goldmine of Potential Savings
“A penny saved is a penny earned”… or so the old proverb goes. Of course, the value of a penny has changed somewhat from the time when your mother offered her wisdom on the value of keeping what you earn. Today, you could save thousands of dollars by simply making the right mortgage decision. If you’re like most Canadian homeowners, your mortgage is a goldmine of potential savings.
In the past few articles, we’ve talked about the importance of your mortgage as one of your most significant financial decisions. We’ve explored the value of seeking the advice of a mortgage professional -whether you’re buying a home or renewing an existing mortgage.
Today, let’s take a look at the bottom line: the savings you can enjoy by making the right mortgage decisions.
It is the primary role of a mortgage broker to find you the right product for your personal situation. A mortgage broker is a financial professional and – like your investment advisor – he or she will want to understand your personal situation and payment preferences. Your mortgage broker has access to a broad spectrum of lending institutions, so you can do some valuable comparison shopping for the right combination of features, rates and mortgage options.
All these choices offer you substantial opportunities to save money over the life of your mortgage.
If you are like most homeowners, you are focused -for good reason – on finding the best possible rate for your mortgage. Your mortgage broker can offer you the best range of rate options and terms. If a mortgage broker can get you one per cent off the posted rate, that could translate into more than $13,000 in interest per $100,000 borrowed over a 25-year amortization schedule. If, however, you believe that most mortgage rates are basically the same from one institution to the next, then consider the fact that even an eighth of a point difference in the rate can offer significant savings over the duration of your mortgage.
But it’s also important to look beyond the rate. There are other ways to find savings in your mortgage. Your mortgage broker is up-to-date on market trends and new opportunities… as well as some of the tried-and-true ways to save money in a mortgage.
Do you get an annual bonus in your job? You may want to use that bonus to pay down the principal of your mortgage. If you pursue this strategy consistently over the life of your mortgage, you could save thousands of dollars in interest by paying your mortgage off sooner.
Are you paid bi-weekly or bi-monthly? Consider a change from the usual monthly mortgage payment. Set up your mortgage payment schedule to coincide with your pay period. Again, you can shave years off your mortgage, and enjoy thousands of dollars in savings.
In the coming weeks, we’ll look at some of these savings opportunities in more detail. In the meantime, consider the old penny proverb again. How much is your time worth? Time savings is one of the key, unexpected benefits that clients say they have enjoyed when they choose to work with a mortgage broker. Above all, a mortgage broker is an expert in customer service, and that means that your broker looks after every detail of your mortgage research and negotiations on your behalf.
More Canadians are Turning to Mortgage Brokers
When it comes to mortgage financing, more and more Canadians are choosing to work with a professional mortgage broker. According to a recent study by the Canada Mortgage and Housing Corporation (CMHC), 23 per cent of mortgages written were arranged through a broker.
Canadians are just catching up with their American neighbors, who are far less likely to simply walk into their home bank for a mortgage. In 2000, almost 70 per cent of all U.S. mortgages were arranged through mortgage brokers.
If we follow the U.S. model – and it seems that we are — then we’re in for a sea of change in the way Canadians manage their most significant personal asset. It makes sense. After all, investment returns aren’t as lucrative as they were five years ago, and investors are seeking out ways to make financial gains through avenues they may have overlooked.
There are some significant benefits to working with an independent mortgage broker. Firstly, let’s compare mortgage expertise: Most banks have one or more representatives who are specifically assigned to assist with mortgages. Their role is to develop mortgage business for the banks. A ontario mortgage broker, on the other hand, is a trained mortgage professional who has met standards for education. The comprehensive training of an independent mortgage broker may exceed the training of their counterparts at the bank. More importantly, the mortgage broker is independent. He or she is not an employee of a lending institution, but has access to rate and option information for a full spectrum of chartered banks and other lending institutions. Their role is to find the best possible mortgage rates and options for you.
Let’s also look at choice: A mortgage broker offers you access to many competitive lenders, each with a range of mortgage options. It would take weeks of research, telephoning and personal visits to recreate the range of features and options that a mortgage broker has at his or her fingertips. Rate information, mortgage options and payment schedules are up-to-the-moment, so you and your broker can make valid comparisons of the options available. The result of all this choice is a mortgage which is customized to meet your needs and to save you money.
Also consider accessibility. Your mortgage broker will be available to you before and after your mortgage closes, which will be good news for those who have spent long hours on hold or in a telephone voice answering loop.
Above all, clients have turned to mortgage brokers for better rates. Access to a broad range of lending institutions is a critical advantage for mortgage shoppers. A quarter-point difference on your mortgage rate can add up to thousands of dollars over the life of your mortgage. Many mortgage brokers work inside a brokerage organization with sufficient mortgage volumes that they can negotiate the best possible rates for your situation. Canadian homeowners who have experienced the benefits of a mortgage broker are unlikely to ever return to a world in which they simply accept the best posted rate at their local bank.
Getting a Colorado Mortgage Rate Quote
If you are looking for a Colorado mortgage rate quote for a Colorado mortgage loan, then there are many places to go. Of course there are many ads for different Colorado mortgage lenders that are based in the state and around the country. But for a better, more personal Colorado mortgage, it is best to go with an in-state Colorado mortgage lending professional.
Getting a Colorado mortgage loan from an in-state Colorado mortgage lending company has advantages, the key being that Colorado mortgage lending institutions know Colorado the best.
Colorado is unique, with a particular mix of modest private homes, second homes, luxury homes and other types. Because of this, the needs of would-be borrowers who are looking for a Colorado mortgage quote are unique as well. That necessitates a knowledgeable Colorado lender who can work with a borrower and fir their needs with the best type of Colorado mortgage loan.
Looking For a Colorado Mortgage Quote Provider
While shopping for a Colorado mortgage quote, a borrower will hope for a Colorado mortgage lender with a low rate. But that shouldn’t be the only determining factor to be considered than that part of the Colorado mortgage rate quote. The lowest bidder is not always the best place to get a Colorado mortgage loan. When deciding on the best Colorado mortgage quote, consider these other factors:
•The fees for Colorado mortgage loans
•The closing costs, which can range widely between Colorado mortgage lending companies
•Product diversity in the Colorado mortgage loans.
There are many different kinds of loan programs to choose from for borrowers and it is best to look around before a borrower decides on their Colorado mortgage quote. Aside from the Colorado mortgage rate quote itself, its best to consider fixed vs. variable loans and the different lengths of terms
•The Colorado mortgage lending companies with the best customer service. When borrowers are looking for a Colorado mortgage quote, there should be an expectation that the company will have excellent customer service, answering calls and returning them
•A Colorado mortgage lending company with experienced and informed associates. The broker working up your Colorado mortgage quote ought to be able to explain all parts of the different types of Colorado mortgage loans. They need to be able to search and return with any questions you have about your Colorado mortgage rate quote
Finding a Colorado Mortgage Loan
There are brokers nationwide you want to give a borrower a Colorado mortgage quote. Borrowers see their ads all over the place — in the yellow pages or newspaper; radio or TV. There are also many lenders who can provide Colorado mortgage rate quotes online who can also be a great resource.
Online Colorado mortgage quote providers can help you if you are looking to get many quotes with limited effort and be able to make a choice between the many Colorado mortgage quotes available. But that should not come as a replacement from real people. A borrower needs to do research; search for referrals online, check on the company to find the best Colorado mortgage quote that best suits their needs.
Mortgage Security not That Costly
Forget everything you thought you knew about the benefits of taking a variable-rate mortgage instead of locking in for the long term.
A new study suggests the security of a five-year mortgage costs little or nothing beyond a riskier variable-rate mortgage, providing you get a jumbo-sized rate discount.
“Interest costs on discounted closed five-year mortgages have been close to, and often lower than, those of variable-rate mortgages since late 1996,” senior Canada Mortgage and Housing Corp. economist Ali Manouchehri writes in the study.
Homeowners have made variable-rate mortgages hugely popular in the past few years in the belief that you can save on interest costs by pegging your mortgage rate to your lender’s prime lending rate. As the prime rises, or as has generally happened in the past few years, fallen, so goes your mortgage rate.
The prime rate at the major banks is now 4.5 per cent, while the posted five-year rate at the big banks is 6.15 per cent. In just one year, the variable-rate choice would save you about $1,700 on monthly payments toward a $150,000 mortgage amortized over 25 years (assuming a level prime rate).
Historically, you would also have saved a lot. The CMHC study shows that five-year mortgages taken out from 1993 through 1998 would have cost anywhere from $50,000 to $5,000 in additional interest paid over the term of the loan (the example is based on a $100,000 mortgage amortized over 25 years).
The flaw with this analysis is that it doesn’t reflect real-world mortgage pricing. These days, very few people take out a mortgage without a sizable discount off the posted rates at major banks.
For that reason, the CMHC’s Mr. Manouchehri decided to compare discounted five-year mortgages with discounted variable-rate mortgages. Incidentally, five years is the most popular term by far for fixed-rate mortgages at about 59 per cent of the total.
The size of the discounts Mr. Manouchehri applied was based on the difference between posted major bank rates and the best deals available from other lenders. For five-year mortgages, he used a discount of 1.25 of a percentage point; for variable-rate mortgages, it was 0.4 of a point off prime.
For five-year mortgages taken out between 1993 and mid-1996, the five-year mortgage was costlier in terms of interest costs. Since then, however, variable-rate mortgages have generally been a little bit more expensive.
Obviously, there’s nothing in this study that decides the fixed-rate versus variable-rate debate once and for all.
In fact, the CMHC study may just confuse anyone who recalls some research done for Manulife Financial back in 2000 by York University finance professor Moshe Milevsky. His research found that the extra interest charged on a five-year mortgage would have cost $20,000 on average between 1950 and 2000 for a $100,000 mortgage amortized over 15 years.
To make some sense of the variable-rate versus five-year question, let’s go back to the CMHC study.
It shows that five-year mortgages, discounted or otherwise, were especially bad choices for a three-year period starting in mid-1993. Rates were high for a while back then, but they subsequently fell.
You were a spectator to these rate declines if you were stuck in a five-year mortgage, while people in variable-rate mortgages would have benefited almost immediately.
It’s a different world now, though. Five-year mortgage rates are close to a 50-year low, which suggests they’re far more likely to rise over their term than fall.
So what’s the best choice here, variable-rate or five-year fixed rate? People who want to pay rock-bottom mortgage rates for as long as possible will probably still want a variable-rate mortgage. Remember, you can lock this sort of mortgage into a fixed term without penalty in most cases.
The case for the five-year term looks almost as strong, though. First, the CMHC study tells us there may not be a significant cost to locking your mortgage in for five years, and you might even save a little over a variable-rate mortgage.
Second, the likelihood of higher rates in the years to come would suggest that this is a good time to lock in.
If you had a variable-rate mortgage discounted to 4 per cent, the prime would have to go up by 0.85 of a percentage point to equal the current five-year rate. That’s not a lot of ground to cover in the span of 12 to 18 months when the economy is doing well.
Arguably, the variable-rate versus fixed-rate debate is all about risks and rewards. Right now, the five-year option offers much less risk, and almost as much reward.
More Than the Best Rate
Ask Denver mortgage loan providers what would-be borrowers want to know and the answer is simple. Those who are shopping for mortgage loans in Denver want to know what their rate would be for a Denver mortgage.
But for the average mortgage lender, the answer is hard to come up with at a moment’s notice. There are no two borrowers who are exactly alike, so no two Denver mortgages would be exactly alike. There are many factors in the Denver mortgage quote equation, like:
• The type of properties for needed Denver mortgages
• The applicant’s credit score for Denver mortgages
• The future plans of a borrower applying for a Denver mortgage
• Whether the Denver mortgage loan quote is needed
for a first home or subsequent home
•The size of a mortgage loan and whether the Denver property will need a jumbo loan (more than $417,000)
• Other debt obligations of the applicant for Denver mortgage loan
• Applicants income for Denver mortgage loan quote
With these factors, a mortgage lender in Denver will find the best product for mortgage loans in Denver. To get the best rate for the borrower looking for a Denver mortgage quote, the mortgage lender in Denver will look at all of their products to see how they can best obtain the Denver mortgage loan quote and which of the Denver mortgages they have available will be most affordable for a customer.
Getting Beyond the Denver Mortgage Quote Rate
In addition to the mortgage loan rates in Denver, there are other factors that can impact the affordability and final amounts owed for Denver mortgages. These need to be carefully considered. Some mortgage lenders in Denver will offer good, low rates for Denver mortgages but have high fees and closing costs that makes up for the difference. Denver is not immune to such dealings in Denver mortgages. Be sure to ask about closing costs and other fees for Denver mortgages early in the process. These kinds of mortgage lenders in Denver want a borrower to get to the “point of no return” before they realize how high the true cost of the lower Denver mortgage quote can be.
How to Assess a Good Mortgage Lender in Denver
What a borrower should aim for is the best mortgage loan in Denver with the best total package including reasonable rates, closing costs, and frees, along with excellent customer service from the lender. A borrower should expect a mortgage lender in Denver to provide good service that is helpful, informative and, most importantly, professional in providing a Denver mortgage loan quote. A borrower should be able to ask questions they want about the Denver mortgage, product, the borrower’s Denver mortgage quote, or any other nformation about options and terms. When a borrower asks, they should get a professional and detailed answer. A borrower should never leave a conversation about the Denver mortgage loan quote wondering to what they are agreeing or feeling disrespected. If they do feel that way, then they should go elsewhere for a mortgage loan in Denver.