Quote:
Originally Posted by Hesla
I posted this in the power ring forum, but i thought i could get more exposure here.
http://www.canadianmortgagetrends.co...19-months.html
There are some estimates that the rates with increase 2.75% over the nexst 19 months.
So help me out here.
Currently I have a Prime- 0.75% Variable rate mortgage which expires in March of 2013. I can fix @ 4% before the weekend ends. What should I do ?
Predicting the future is tough here, but what is known is that regardless the banks will likely be increasing their fixed mortgage rates over the next year.
So... right now I pay 1.5%. IF i were to fix i would instantly have to pay an addtional 35% on my mortgage. However, if i fix in a year or two, i would likely be paying for a much larger increase.
Thoughts ?? |
I'm in the exact same position for a couple of my rental properties. Currently at prime - 0.8%, 1.45% and have that for another 2 years, and the bank was offering 3.89% fixed 5 years.
So I sat down and made some spreadsheets and basically tried to figure out where interest rates would have to be in two years time to make it cheaper for me to switch now vs staying pat. And by cheaper I mean out of pocket amount spent.
After a lot of playing around I figured it was around 6%.
So if I think mortgage interest rates are going to be 6% or higher in two years it makes sense to switch, if not then stick. I also built in a .5% increase next year for the variable.
Of course in two years I can stay variable, 5 year fixed rates might be 6% in two years time, but will variable rates be that high? Prime would have to go up what, 3 or 4 points?
The other interesting thing is assuming 1.45, 1.95, 6, 6, 6 for the next 5 years, even though the payments would be the same, the amount going towards the principle goes down by 10%.