Good Mortgage Rate?

[Dodsdomd]

Does 5.89% for 5 years seem like a fair rate?

[Bertuzzied]

Bank of Canada might lower interest rates on December 4 but that would only immediately affect variable rate mortgages and line of credits.

I'd personally go with the secure line of credits. More flexibilty on payments and no payout penalty if you ever decide to sell.

[Dodsdomd]

Originally Posted by Kobatuzzied

Bank of Canada might lower interest rates on December 4 but that would only immediately affect variable rate mortgages and line of credits.

I'd personally go with the secure line of credits. More flexibilty on payments and no payout penalty if you ever decide to sell.

How does the secure line of credit work?

[Bertuzzied]

Originally Posted by Dodsdomd

How does the secure line of credit work?

You use your house as security and your rate is prime. Minimum payments are monthly and is just your interest. So right now prime is 6.25%. If you have a $250,000 LOC you would need to pay minimum $1302. You would need to pay more then that each month though,or you will never pay off your LOC.

It's more flexible because you can put more money towards it some months but for months like December then you might just want to pay the min.

If you went with the rate you gave above on the 5 year close you would be paying $1583/month

[simmer2]

Originally Posted by Kobatuzzied

Bank of Canada might lower interest rates on December 4 but that would only immediately affect variable rate mortgages and line of credits.

I'd personally go with the secure line of credits. More flexibilty on payments and no payout penalty if you ever decide to sell.

I disagree with this. I did a ton of research comparing a traditional mortgage with a LOC Credit style mortgage before I took one out. I compared Manulife with Royal Bank, and in the end a traditional mortgage is better for you. The interest rate is lower with a traditional mortgage. With the difference in interest rates between Royal and Manulife, put that money towards your principal with Royal Bank and it is a better option.

Simply put, lower interest rates = better for you. Whether you want to go fixed or variable, that's a different question. I currently have a variable closed mortgage for 5 years at 5.5% (Prime - 0.75%). Variable has always outperformed fixed interest rates over a period of time, so I'd recommend that. Then again, some people like the security of knowing their interest rate is fixed, so to each their own.

Do a bit of research and talk to some mortgage experts so you can get a better understanding of how it works.

[ken0042]

Originally Posted by Kobatuzzied

If you have a $250,000 LOC you would need to pay minimum $1302. (snip)

If you went with the rate you gave above on the 5 year close you would be paying $1583/month

Right, but with the $1302 payment, absolutely nothing goes towards principal, so there is also no penalty to make yourself end up years behind in paying off your house. Bottom line is 6.25 is a worse rate than 5.89

To answer the OP's question, last week when I was looking the best I could find for 5 year was 5.97%.

[fredr123]

We got 5.69% on 5 years fixed. That was in September though...

[Bertuzzied]

Originally Posted by ken0042

Right, but with the $1302 payment, absolutely nothing goes towards principal, so there is also no penalty to make yourself end up years behind in paying off your house. Bottom line is 6.25 is a worse rate than 5.89

To answer the OP's question, last week when I was looking the best I could find for 5 year was 5.97%.

Yeah i mentioned that in the first part of the post. Also if you think mortgage rates are going to fall which they might do, you can also go from the LOC to a mortgage at any time.

This isn't the product for everyone and it's actually harder to qualify for a LOC then a mortgage since it's revolving credit. hmmm just talked with my mortgage broker and he is doing 4 LOCs for every mortgage.

[Madman]

Originally Posted by Kobatuzzied

You use your house as security and your rate is prime. Minimum payments are monthly and is just your interest. So right now prime is 6.25%. If you have a $250,000 LOC you would need to pay minimum $1302. You would need to pay more then that each month though,or you will never pay off your LOC.

It's more flexible because you can put more money towards it some months but for months like December then you might just want to pay the min.

If you went with the rate you gave above on the 5 year close you would be paying $1583/month

Lets compare apples to apples - if you were to pay $1583/month on both types of debt, the traditional mortgage would cost you less...simple as that.

[simmer2]

Originally Posted by Kobatuzzied

Yeah i mentioned that in the first part of the post. Also if you think mortgage rates are going to fall which they might do, you can also go from the LOC to a mortgage at any time.

This isn't the product for everyone and it's actually harder to qualify for a LOC then a mortgage since it's revolving credit. hmmm just talked with my mortgage broker and he is doing 4 LOCs for every mortgage.

I qualified for an LOC just fine. And I find that stat hard to believe that he's doing LOC's 4:1 over mortgages. With people's spending habits, I firmly believe that the LOC is more of a detriment than a help to most people.

[Bertuzzied]

Originally Posted by Madman

Lets compare apples to apples - if you were to pay $1583/month on both types of debt, the traditional mortgage would cost you less...simple as that.

What if the prime rate fell to 5.25% or 5% in the next 6 months?

[TurnedTheCorner]

I'm in the midst of a 5 year 4.50 fixed rate. Lucky me.

I was on ING the other day and saw a 5 year fixed at 5.99.

[Bertuzzied]

Originally Posted by simmer2

I qualified for an LOC just fine. And I find that stat hard to believe that he's doing LOC's 4:1 over mortgages. With people's spending habits, I firmly believe that the LOC is more of a detriment than a help to most people.

Oh yeah. i totally agree. Buying a car or electronics with your LOC is not a very good idea.

Hmm well i just asked him. He works for TD.

Like i said I would prefer the LOC. and other people prefer conventional mortgages. I'm biased though cuz i locked into a 5 year mortgage in 2000 at 7.25% which at that time was already 1% off the posted rates of 8.25%. Then the tech crash came and interest rates dropped to 3.25%. So unless i was willing to pay like a $20000 payout penalty i was soooo locked! hahaha.

[zukes]

Originally Posted by TurnedTheCorner

I'm in the midst of a 5 year 4.50 fixed rate. Lucky me.

I was on ING the other day and saw a 5 year fixed at 5.99.

Yep, I am lucky too, 4.76 is mine.

[Slava]

I think that the original rate is a good one...the best I'm aware of right now is 5.99 fixed for five years.

Traditionally people with floating rates have done better than people with fixed rates over the long-term. The Manulife account reference above is not for everyone; some people haven't got the discipline to use it properly and get out of debt faster.

Further, the LOC accounts should be used as part of an overall financial strategy to maximize their benefit. No question though, if they are used solely as a mortgage product (with no other debt factored in, and no other reason for using one other than paying interest only) then the use is limited. At this point with a period of low interest rates and rising rates over the past 18 months or so, most people want to lock-in and preserve those lower rates.

[Julio]

Originally Posted by simmer2

I qualified for an LOC just fine. And I find that stat hard to believe that he's doing LOC's 4:1 over mortgages. With people's spending habits, I firmly believe that the LOC is more of a detriment than a help to most people.

I would ask if that 4 to 1 ratio was on 1st mortgages. For example, I just did a LOC/2nd mortgage with TD @ prime (right now 6.25%) because the g'friend has had some credit card debts, so we consolidated.
In the main point, I would definitely say that the mortgage is the way to go, but to try and get as many options as possible for quick repayment, so that if you have the extra $ you can put it on. Most people don't seem to realize that most mortgages have the option to double your payments, or to put a lump sum on once a year. Make sure what your options on this are, expand them if possible, and you get the flexibility of a LOC to some degree with the lower interest of a mortgage.

[Got Miikka?]

^ 15 % / year or double payments, yes. You can also choose to do 'rapid' payments on your mtg which basically equates to two extra payments per year - this can shave years off your ammoritization. Funny how a little equals a lot.

As far as interest rates go, you can book a rate if you find one you like - this exists because not everyone walks into the bank and has everything in place for their mortgage, but we all know things change, so you are left with some assurance of a decent rate - at TD this booking holds the rate for 120 days.

[Madman]

Originally Posted by Kobatuzzied

What if the prime rate fell to 5.25% or 5% in the next 6 months?

And what if it went up?

If the person is concerned about rates dropping, then they should look at a variable rate mortgage.

Why not have a conventional mortgage with a lower rate than a LOC and then secure a HELOC and have the advantages of both?

[DementedReality]

i am still very intrigued by the manulife ONE product.... i know we talked about it a few months ago, anyone have any new comments to make on the pro's and con's?

[Slava]

Originally Posted by DementedReality

i am still very intrigued by the manulife ONE product.... i know we talked about it a few months ago, anyone have any new comments to make on the pro's and con's?

PM Sent.

I think that this is a fantastic product in general, and has some great benefits. I have my bias (as I've stated before), but if this is a good fit for your situation, I'm convinced that there is nothing to rival this product.