No Worries, Go Fixed.
With all the media hype these days, it’s no wonder that most people look surprised when I tell them I’m a mortgage broker. The average person hears about the credit crunch in the US and assumes we’ve had a major impact here in Canada. In reality, we have lost many sub-prime lenders over the past year and are facing tightening credit now, but for most people not much has changed. In fact, now more than ever, is a great time to “lock” into a mortgage. Getting mortgages funded is not an easy job, and could be compared to being on a battlefield. It takes creativity, hard work and persistence to get the deals done. It’s important to let a mortgage professional handle your mortgage with care.
Rates are at historic lows and money is still readily available for the majority of Canada’s population. House prices are also coming down, and have already dropped 10-20% in Vancouver. It is now a buyers’ market and many first-time home shoppers are taking advantage of more appealing prices, and lower interest costs/payments. Moving into your dream home is a reality worth pursuing. Essentially, if you want to get a great mortgage, your chances are strong. Keep in mind the two biggest things lenders look at is your income (or business) and credit score – if these are solid, then the rest is easy. If your credit is not in great condition (below 600), expect to pay a higher interest rate.
Although bank prime is now at 3% (could drop another .50% soon), it is my opinion that fixed rates are currently the best option. If you want to go variable, expect to pay close to 1% over prime (or 4% ) at this time. Though the variable option looks good now, when the Bank of Canada begins hiking rates, you’ll see your interest rate and monthly payments increase along with it. If you go with a fixed rate, you can take advantage of 3- or 5-year terms, from 3.75-4.49% and be guaranteed this rate for the entire term. Why risk paying more in the long run to save only a few bucks now? The economy will eventually turn around and inflation will kick in – with rates back on the rise.
Yes, it’s true that the economy is having a rough go and 2009 will be a challenging year, but with every downturn comes great opportunities for those with a few dollars to invest. Much like the last 7-year boom, I think we’ll see a lot of money made when the recession turns around after 2010. So my advice for the next couple of years is to buy a home, some Apple shares for good measure, and relax… the best is yet to come!
