I have a received a lot of calls lately regarding mortgage rates. There is a lot of attention in the media being given to the recent special offers, particularly 2.99% from BMO and I wanted to provide some clarification on the subject.
Fixed mortgage rates have come down slightly and are around the 3.15% to 3.35% mark for 5 year terms. The BMO offer at 2.99% is the most aggressive out there; however, it comes with a lot of fine print. The maximum amortization is 25 years and it’s for owner occupied properties only (no rentals). You are limited to 10% pre-payment per year and there is NO option to refinance during the 5 year term. You are stuck with it and the only out is by sale of the property. This is a great rate but not for everyone so please contact me if you’d like further info.
Typically, mortgage penalties are set up as the greater of 3 months interest or IRD – interest rate differential (the difference between your contract rate and the current rate). This is in place to avoid us constantly breaking contracts to go to a better rate and this IRD typically will negate any savings from doing so. However, there are instances where the timing is right and we can refinance your mortgage and save money. Please contact me if you’re interested in looking at this option.
As for variable rates, we expect them to remain at current levels throughout 2012 and possibly well into 2013. This can change depending on global economic events and info so if you’re on a variable rate, we will continue to update you with any developments and provide recommendations. The current discount being offered on variable rates is no longer as attractive as banks profits are being squeezed. If you are a current variable rate holder, this will not affect your rate, only those entering into a new variable term. With the reduced discounts, the fixed rate is currently a lot more attractive from a risk reward standpoint, in my opinion.
I hope this information is useful. Please do not hesitate to contact me with any questions or concerns.
(This article copyright Dara Fahy. All rights reserved.)