Tino Brelak is an experienced and knowledgeable mortgage broker servicing and helping clients in the Greater Toronto Area (GTA) for over 15 years. His banking background (including branch manager, credit auditor and financial advisor) allows him to navigate the mortgage process and ensure you get both the best mortgage rate and the right product. Whether your credit is perfect or poor, Tino can help you purchase a home, refinance, finance your investment property or get you the best mortgage rate at renewal.
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Should You Lock In or Not?

[Posted on: November 5, 2017]

That depends. Over the past 7 years, there were many indications that variable rates will go up and many pressures on those with variable rates to lock in. Looking backwards, locking into a fixed term during all those years (with exception of the last couple of months) would have proven wrong. But now that we've seen two quick hikes, one wonders what to do.

Let's analyze it.

The truth is, nobody has a crystal ball to predict what will happen with the economy in the upcoming months and years. If economy continues to show signs of strength and growth, it will put pressure on inflation and on Bank of Canada to further raise rates. But if these two rate increases significantly slow down the real estate market and adjacent industries, we will likely see the reason (and pressure) to keep the rates intact.

Since we, the common folks, cannot control the economy nor make predictions on matters on which even economists disagree, let's take a look at the practical side of things.

If you lock into a 5 year fixed rate now, you will probably get a rate that is at least 0.5%, if not 0.75% higher than what you currently have with your variable mortgage. This means that the variable rate will have to increase another 1% to 1.5% before your maturity date (half of which to reach your "new" fixed rate and half to exceed it) before you start losing money by staying with your variable rate versus fixed.

So, my advice is to stick with your original, long-term strategy that made you select a variable rate, whatever that strategy was. Perhaps it wa ...Read Mores focusing on payments versus rate, perhaps it was to guarantee an inexpensive penalty should you need to break your contract prior to maturity, etc.

But if it's going to keep you awake at night, let's talk about your conversion options.

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How are higher rates affecting your mortgage payments?

The July and September rate hikes by the Bank of Canada have increased variable mortgage rates by a total of 0.5%. If your variable rate was 1.95%, it is now 2.45%.

While there are institutions whose mortgage payments will stay the same, regardless of the change to the Prime, most lenders` payments will change as rate increases.

A $100,00 mortgage, with an amortization of 25 years, would have seen an increase of around $25 monthly, or $300 annually.

If your mortgage has a balance of $350,000, a net increase of 0.5% would hit your wallet by $85 monthly, or $1,020 annually (rough estimate).

The next scheduled dates for announcing the change to the Prime rate are October 25h and December 6th.
If you have a variable rate and would like to discuss your options, please call me!

Purchase or refinance now before rules change in January!!

If you`re looking to buy and will have more than 20 percent down, or if you are considering refinancing, then you might want to do so before January 1, 2018. Why?

On October 17, the Office of the Superintendent of Financial Institutions (OSFI) released new guidelines for residential mortgage underwriting at all federally regulated financial institutions. Beginning January 1, 2018, a new "stress test" will be applied to all new conventional mortgages - and not just those mortgages that require mortgage insurance (downpayment or equity of less than 20%).

The so-called "stress test" is designed to protect homeowners should interest rates rise. Lenders will be obligated to qualify all new conventional mortgages at the greater of the Bank of Canada`s five-year benchmark rate (currently 4.89%) or the contracted rate plus 2%. So if your contract rate is 3.29%, you will be qualified at 5.29%.

Why You Should Refinance Now

If you are considering a refinance for any reason - to consolidate your debt, pay for your kids` education, renovate your home or buy an investment property - you should consider doing it now.

New mortgage rules include stress testing for conventional mortgages which, when implemented on January 1, 2018, will make refinance more difficult for many Canadians.

The present day reality is as follows... If you wanted to refinance your mortgage, your broker or bank could approve you for the maximum amount that your income can carry, based on on the contract rate of your mortgage (let`s call it 3.29%) and 30 years amortization.

This will roughly approve you for a mortgage that is 5 times your salary. In other words, your income of $100K will approve you for a mortgage of $500K.

The new mortgage rules will lower your "qualifying power" by at least 20%, since the "stress-test" will be using the higher of posted Bank of Canada rate (currently 4.89%) and 25 years amortization or contract rate + 2%.

Practically speaking, that $100K income could lower your maximum approved mortgage below $400K.

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We regularly receive short-term rate promotions that are not posted online, which means our rates change frequently. Please contact me for these unpublished rate specials, and for your own personalized rate and mortgage plan.

Terms Posted Rates Our Best Rates
6 Months 3.14% 3.10%
1 Year 3.04% 2.64%
2 Years 3.24% 2.54%
3 Years 3.44% 2.74%
4 Years 3.89% 2.94%
5 Years 4.99% 3.04%
7 Years 5.30% 3.69%
10 Years 6.10% 3.74%
5 Year Variable 2.35% 2.35%


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