1. How will this affect me?
For the average Variable Rate Mortgage (VRM) holder, this will reduce the interest you pay by approximately $13 per 100k. (if & when they decide to make a change)
2. Does this affect my secured line of credit?
If you have a line of credit, secured or unsecured, that floats with prime, whenever the banks follow the BOC by reducing prices your rate will be reduced. As most lines of credit have a small interest-only payment, most may not notice a difference.
3. Myth: This will allow me to qualify for more with my mortgage preapproval.
No. The qualifying rate to take a VRM is 4.79% – more than double the rate you pay. This ensures that you can afford future rate hikes. With that high of a qualifying rate, only those purchasing WELL below their budget qualify to take the luxury of a variable.
4. What do I do?
If you have a VRM, your existing lender will send you a letter (within a month) outlining the change (if/when they follow prime) and amend your payments accordingly.
5. What is the best way to optimize this change to my advantage?
Keep your payment where it is, and don’t reduce it if you already are not maximizing your payments to help pay your mortgage off faster. Consider this a gift to your financial future!
6. Why were lots of the major banks suggesting borrowers lock in their rate only a few days before the reduction in rates?
Simple – it makes them more money! Banks are very smart and great at releasing info that benefits their bottom line. Fixed rates are easier sells to investors, and banks can likely collect a large IRD if you need to make a future change.
Working with an AMP ensures you have access to unbiased, transparent advice to empower you with the knowledge to make the best decisions and experience the lowest cost of homeownership.
Questions on your mortgage or someone you care about? Call or email us today to help you personally.
Angela Calla, AMP
Dominion Lending Centres-Angela Calla
Host of ” The Mortgage Show” Saturdays @ 7pm on CKNW AM980 Phone : 604-802-3983 Fax: 604-939-8795
Email: acalla@dominionlending.ca