Variable vs closed mortgage

[Jermyzy]

So my mortgage is up for renewal. I've been told historically variable mortage tends to save more money than a closed mortage. When I first got my mortgage in 2006, we got prime - 0.9%. The prime rate has dropped since then so we ended up doing pretty well. Talked to the bank and apparently the best variable rate is now only prime - 0.3% (current prime rate is 3%). With fixed rates ranging between 2.5-3% depending on length of term and with interest rates likely to rise in the next years, I'm wondering if it might be better to go with a fixed rate this time. My wife says she saw an ad by a mortage broker that still offer prime - 0.9% variable but can't remember which company and quick google search turns up nothing. What are your thoughts/opinions>

[SumAznGuy]

Talk to your mortgage specialist and see if they allow you to sign up for a variable mortgage and change it to a fixed rate mortgage penalty free.

If you can, then you can switch over to a fixed rate mortgage when prime starts to go up.

[InvisibleSoul]

Not that I'm an expert on mortgages myself, but I think you're confused about terminology.

Variable and closed do not relate to the same thing.

You compare variable vs fixed rate mortgages.

Or you can compare open vs closed mortgages.

You can have a variable rate open mortgage, a variable rate closed mortgage, a fixed rate open mortgage, or a fixed rate closed mortgage.

[AWDTurboLuvr]

Originally Posted by InvisibleSoul

Not that I'm an expert on mortgages myself, but I think you're confused about terminology.

Variable and closed do not relate to the same thing.

You compare variable vs fixed rate mortgages.

Or you can compare open vs closed mortgages.

You can have a variable rate open mortgage, a variable rate closed mortgage, a fixed rate open mortgage, or a fixed rate closed mortgage.

What he said. I have used a open, variable rate mortgage for the last 8 years. I like it because 1) low rates compared to fixed rate mortgages, 2) Much higher limit on what I can pay down on my principal and 3) the ability to convert to a locked in rate whenever I want.

I'm with BMO btw.

[Jermyzy]

Originally Posted by InvisibleSoul

Not that I'm an expert on mortgages myself, but I think you're confused about terminology.

Variable and closed do not relate to the same thing.

You compare variable vs fixed rate mortgages.

Or you can compare open vs closed mortgages.

You can have a variable rate open mortgage, a variable rate closed mortgage, a fixed rate open mortgage, or a fixed rate closed mortgage.

Sorry, yes I meant variable vs fixed

[SumAznGuy]

Personally, I use ING direct's rates as a starting point when I go to the banks to negotiate. At the bare minimum, they will match ING's rates but they better do more if they want my business.

[Jermyzy]

Can anybody recommend a good mortgage broker? I think I might benefit going through a broker this time instead of with TD

[tiger_handheld]

Originally Posted by Jermyzy

So my mortgage is up for renewal. I've been told historically variable mortage tends to save more money than a closed mortage. When I first got my mortgage in 2006, we got prime - 0.9%. The prime rate has dropped since then so we ended up doing pretty well. Talked to the bank and apparently the best variable rate is now only prime - 0.3% (current prime rate is 3%). With fixed rates ranging between 2.5-3% depending on length of term and with interest rates likely to rise in the next years, I'm wondering if it might be better to go with a fixed rate this time. My wife says she saw an ad by a mortage broker that still offer prime - 0.9% variable but can't remember which company and quick google search turns up nothing. What are your thoughts/opinions>

Who told you that?
Interest rates are going no where but down (if possible) for the next couple of years or so. The US is currently expecting another recession (depending on what happens next qtr)

Some would say lock in at low rates now, but I say stick with prime for the next 5 years. I (an average investor) expect rates to rise 2014/2015 ish. I don't own a home, so I'm not sure if there is a penalty for locking into a prime rate say in 2013 or so..

[SumAznGuy]

Don't have any particular broker to recommend. Last one I talked to was very slimy. He somehow got 3 mortgages basically at the same time for the person who recommended him to us. But she was only making $12/hr and single income while the other 2 houses were renovation investments.

Who does most of your banking? Perhaps giving them a try first since they are your home branch and will problably want to keep your business.

[SumAznGuy]

Originally Posted by tiger_handheld

Who told you that?
Interest rates are going no where but down (if possible) for the next couple of years or so. The US is currently expecting another recession (depending on what happens next qtr)

Some would say lock in at low rates now, but I say stick with prime for the next 5 years. I (an average investor) expect rates to rise 2014/2015 ish. I don't own a home, so I'm not sure if there is a penalty for locking into a prime rate say in 2013 or so..

Personally, that is my belief. Overall, the world economy is in a recession thanks to the US and look at what is happening in Europe with Greece, and Italy.

It would be a bad idea for the Bank of Canada to raise prime.

[Jermyzy]

Originally Posted by tiger_handheld

Who told you that?
Interest rates are going no where but down (if possible) for the next couple of years or so. The US is currently expecting another recession (depending on what happens next qtr)

Sorry, it was not based on any concrete news. From what I remember, Canada was initially planning on increasing interest rates this year but because of recession worries they have held off this year, thought I heard that they might look into increasing it in mid-2012.

Anyways, TD (who our current mortgage is with) is quoting us prime - 0.3% (2.7% current) for variable. Fixed rates 1 year - 2.90%, 2 year - 2.54%, 3 year - 3.1%.

These seem to be on par/slightly better than most posted rates so not sure if it's worth seeing a mortgage broker

[SumAznGuy]

Originally Posted by Jermyzy

Sorry, it was not based on any concrete news. From what I remember, Canada was initially planning on increasing interest rates this year but because of recession worries they have held off this year, thought I heard that they might look into increasing it in mid-2012.

Anyways, TD (who our current mortgage is with) is quoting us prime - 0.3% (2.7% current) for variable. Fixed rates 1 year - 2.90%, 2 year - 2.54%, 3 year - 3.1%.

These seem to be on par/slightly better than most posted rates so not sure if it's worth seeing a mortgage broker

Those aren't bad rates compared to ING. 5 year variable is 3%.
1 year fixed is 3.09%
2 year fixed is 3.25%
3 year fixed is 3.29%

Take a look at how much money you still owe and take a look at what the maximum you can pay comfortably per month without stretching yourself too thin.

Can hurt to walk into another bank and see what they can do to try to get your business.

[SumAznGuy]

I'm not sure if you know this, but I'll throw it out anyways.

Some banks will give you another X% off of the interest rates if you have a bank account with them.

We went back to the same bank to renew our mortgage and since we had a chequing acct with them, we got an even lower rate.

[Jermyzy]

Thanks, my wife does all her banking with TD and our LOC is with TD as well (my banking is at RBC). Also, my family has dealt with this mortgage specialist for a very long time now. I will make an appointment to see them in person and see if we can work anything else out. I'm just not sure whether I should stick with the variable rate or lock-in. The 2 -year rate in particular is very attractive.

[SumAznGuy]

Just ask yourself this. How much money do you still owe and how much of a difference do you think there is going to be in the economy in the next 2 years?
IIRC, US presidental elections is in 2012.
If Obama wins again, how will the economy change?
If Obama loses, how will the new person change the economy?
Will Greece default and go bankrupt or will the European union join together to bail out Greece?
With the new President coming to Italy, how will that impact their economy, which is already in the shitters.

We went through all that and went with a variable rate mortgage. But that was our choice based on our opinions of what Canada's prime rate will be in a few years.

[Wetordry]

5 year variable closed is what I went with
Rates? Google ratesupermarket and use that to grind your banker
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[Selanne_200]

Currently with scotia, did my mortgage at the beginning of this year and I got a rate of prime-0.8% but I'm not sure if they can still give that rate out. If you have a decent relationship with your account manager, try talking to them first as they can always give you rates that aren't advertised. btw, mine is a 5 yr closed variable that cash be locked in anytime with no penalty
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[Jermyzy]

Originally Posted by Selanne_200

Currently with scotia, did my mortgage at the beginning of this year and I got a rate of prime-0.8% but I'm not sure if they can still give that rate out. If you have a decent relationship with your account manager, try talking to them first as they can always give you rates that aren't advertised. btw, mine is a 5 yr closed variable that cash be locked in anytime with no penalty
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All the big banks have stopped offering prime minus mortgages now. If we were proactive and had started looking 2 months ago we probably still could have locked in a decent prime minus mortgage. Looks like we're going for a 2-year fixed rate, and hopefully prime minus mortgages will return by then.

What irks us, is we contacted them a month ago, when prime minus 0.55% was still available. The mortage manager took 2 weeks to get back to us, by then prime minus 0.3% was the best available. Then we found out she didn't put in an official request for us, so by the time we went to sign the papers, they said they couldn't give us the prime minus 0.3%, they could only offer us prime minus 0.1%. We ended up getting a mortgage broker and leaving for another financial institution.

[Selanne_200]

Yea I havn't looked since the beginning of the year so I'm not sure what the rates are right now. Sounds like that institution really screwed you over eh? But then I think that's all BS tho, even tho they didn't officially submit the paper work and what not, they should always be able to give you the same rate that was promised to you verbally, specially since it wasn't your fault that the paper work was not submitted in time. Sounds like the person really screwed up and didn't want to go through the bank manager in order to cover up

[quasi]

I didn't want to make a new thread so I'll post here.

My mortgage is split in two, half was variable the other half is locked in for 28 more months. My variable came due last week, I was at prime -.75%. I'm with a bank that I've been banking at for 20 years. I called my friend at another major bank to get the low rate offered right now on a 5 year fixed from major banks, told 3.09%. I set up a meeting and go talk to someone at my bank, I say someone because I get somebody different everytime I go since the guy I like dealing with left that branch.

I tell her what I want, she tells me the best they can do is 0.339% on a 5 year fixed. If I was to provide the rate I was quoted from the rival and if I moved some more investments over to them she'd see what she could do. I don't know why but this really pissed me off. I know major banks match major banks and I'm a customer who has been with them for a long time, my wife to. They have me bent over a bit because part of my mortgage is locked in.

I go home and think about it, type up an email that includes the written offer on a rate from the rival but I tell her under no circumstances will I agree to invest anything more with them on principal alone. That's not to say I won't invest because going forward we have RESP's and RRSP's but I will not be forced into it in order to get the same rate that other major banks are offering. I also did the math and provided a spreadsheet breaking down both my mortgages over the next 5 years locking in with them at there rate and then paying the penalty and moving everything to the rival locking it all in at the lower rate which is a savings for me over 5 years even with the penalty.

It didn't matter they still wouldn't come down and basically said sorry we couldn't help you think of us in the future. They are throwing away a customer of 20 years, my wife who's been there for 14 our current investments and any future investments as we move towards retirement over 0.003% over 5 years. It seems asinine to me but then again I'm not in banking so maybe it's positive EV. [/rant]

Edited: Removed banks in question not relevant.

[GLOW]

a few coworkers discussed this and one of whom is personally friends with a broker. they said that banks don't bother b/c more than half their clients just walk through the door or just blindly re-sign with them. not sure if that's true

[wreck]

Get the longest termed, lowest % fixed rate you can find.

No discussion needed. I just got a friend a 5yr 2.99 fixed from one of the top brokers in Canada.

[elwell]

Do a HELOC plan and invest the money in tsfa, rrsp's, and life insurance so that you get tax reduction plus your money builds on 6-8% interest. To do so you have to see a financial advisor. PM me if you would like a phone number

[JesseBlue]

You dont need a top broker... I just renewed with 2.99 for 5 years fixed the end of last month but in the end it went to a sister compasy of our old mortgage...too many Of this umbrella companies but going with the sister company means saving on lawyer fees so its all good...

Part of your old mortgage's plan for you to renew is to wait till the last second and throw you a higher rate... I told them thanks but no thanks...
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[A4Some]

I'm on a Home Equity Line of Credit for the last 5 years. Hitting my myself for not switching earlier. I would never go back to a conventional Mortgage. All that interest is front loaded with all the restrictions, it will take you a long time to pay it down. With my HELOC, I reduce my principle by over $1000 each month. At 12 months x $1000 x 5 years, I've reduce my obligation by $60000.
You will never do that with a Mortgage.

Originally Posted by elwell

Do a HELOC plan and invest the money in tsfa, rrsp's, and life insurance so that you get tax reduction plus your money builds on 6-8% interest. To do so you have to see a financial advisor. PM me if you would like a phone number