Bank of Canada next announcement for prime rate adjustment is July.
No one knows for sure but, the financial industry and corporations are still anticipating a couple of more bumps before the end of the year.
Relatively speaking, money is still cheap. The question to ask yourself is, how quickly do you want to pay off your mortgage and really how important is it for you?
Once you pay off the house, what’s the plan? Use it to purchase something else that will appreciate in value better than the current one? Maybe Reno it to prop up the value more.
My suggestion is to get a variable that can be converted to a fixed rate. Rates wont jump like crazy in the short term but, they will rise. And 0.25% over 25 0r 30 years can added up or 0.50% can increase your payments significantly depending on the balance you are starting out at.
Fixed for 5 years, when renewal comes around, you might be looking at a market with a much different outlook for cost of borrowing.
Personally, Ive seen the rates at 19.9% back in the early 80s and pretty much stay at 4% or lower since the middle 90s.
I believe we have hit the bottom and swinging back up. Not by huge swing upwards but, up non the less.
If you want to accelerate your payments to get mortgage fee sooner, there is no magic trick. Simply amortize the mortgage for a shorter period. So, it’s not just the rate that is important. Brokers and banks will offer nice low rates and then encourage 30 years to pay off. So the payment looks nice. The rate looks nice but, it’s a slow climb to pay it off.
And that might not be a bad thing.
Our plan, if you can call it one is, to have the house paid off before rates climb too high. By then, we can evaluate the marketplace for value of the property. Hopefully, it’s appreciated nicely and we can do a reverse mortgage in addition to our pension to live comfortably.
If you want to go no brainer, just lock in a 5 years, keep the same payment and have peace of mind. Some folks worry on variable rates when they hear they are increasing.
Personally, variable rates a good for the tail end. When you don’t owe a lot. Have decent equity. The payments aren’t killing you. You can go monthly. But, the advantages of variable rates over the fixed in the last year haven’t been great for anyone.
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