A lot of time people think of going from variable rate to fixed rate mortgage as variable rate mortgage is subjected to unanticipated rate changes. Here you will read about what are the common mistakes made by people and how they can be avoided.
Most of the people do not review the mortgage rates at timely manner and when the rates hikes up, it is already very late. Fixed Rate Mortgages depend on the bond market prices and bond dealers start to increase rates before Canadian Banks. So, it is better to keep an eye on bond market prices. But this is not an easy task. Only an expert is able to recognize the patterns that directs to increase in mortgage rates. Many a times it happens that people lock their mortgage rates when the rates had already been hiked up and that too at rates higher than that of their variable rate mortgage.
Besides this, there is usually a hike in your monthly payment when you shift from variable to fixed rate mortgage. There are also chances of paying off penalty fees when locking in with major refiance restrictions.
To sum up, we say that having variable rate mortgages can be a good thing. But if you select it with an idea of shifting to fixed rate mortgage in the coming time, then you have to be very careful and proceed smartly.
Canadian government has made changes to down payment rules that will be effective by Feb 2016. These new rules are much better than previous ones. The updated percentages will affect the properties whose prices are between $500,000 to $1 million.
Below is how these new rules work:
- 5% down payment on first $500,000
- 10% down payment on the remainder of purchasing cost
- no change to default insurance premiums
- no change in down payments for properties above $1 million
Besides this, first-time home buyers who buy properties worth below $500,000 will face no difference.
In addition to the modifications in down payments, there are changes to fees of lender securitization and capital requirements. These amendments will increase costs for granter which will most likely be passed down partly or totally to the mortgage buyers.
How will these increase in costs affect the mortgage pricing? There is an estimation of changes of 3-8 basis points in securitization fees. More basis points will be added because of higher capital requirements. In whole, it has been anticipated by the experts that, with the time, there will be approximately 5-10 basis point increase in mortgage prices.
To conclude, we believe that the revision in guarantee fee will hardly effect the mortgage rates.