Originally Posted by InTheSlot
Interesting. I didn't know that, and it certainly seems like a big disadvantage to homebuyers in your country. Funny that you talk about renewing mortgages at the prevailing rate, because I am actually about to refinance my own home within the next few days in order to try to get a better rate, but the one thing I don't want to do is pay ridiculous closing costs that are typically attached to mortgages (~$10,000), so I am going with this company/bank that I've used before who has a $295 closing cost option, with the stipulation being that you get into an adjustable rate mortgage (they have fixed rate options for $295 too, but the rates are a little higher). Here in the U.S. things were pretty bad in 2008-09 when people were deathly afraid of adjustable rate mortgages, and rightfully so, because so many people were approved for them when they shouldn't have been, and then when the rates went up it became even worse, but with this program that I found (and again I've used it before in the past), they lock you into your rate for the first 5 years of your term, and then in the 6th year your rate can go up, but it can't go up more than 2% over what it started with (i.e. if my rate is 2% now, it could only go up to 4% in year 6), and it can never go up more than 6% total over the entire life of the loan - so again that 2% rate I have could only, at worst, become 8% if it went up to the maximum at any point over the 30 years. BUT...what's even better, at any point during the loan, for just another $295, I can "re-lock" my rate for another 5 years, so it doesn't go up at all. So basically at and before every 5 year increment (i.e. 5 times over the life of a 30yr mortgage) I'll gladly pay $295 and re-lock my rate so it stays at 2% for the whole time. $295 x5 is $1,475 and that's wayyyyy better than 10 grand that I would otherwise pay in closing costs for a typical mortgage.
I don't know many other banks that are doing a program like that and I'm not really sure what's in it for them, but I'll gladly take it. I recommend them to my friends whenever I hear someone is applying for a mortgage, and some people are still scared off by adjustable rates, but with the process I outlined above, it really is quite foolproof and great for the consumer/homebuyer.
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