 Interest Rate Anticipation, To lock or not to lock |
|
|
  |
| Interest Rate Anticipation, To lock or not to lock |
 Mar 8 2010, 08:20 PM
Post
#1
|
|
 Group: Forum Members Posts: 88 Joined: 1-September 08 Member No.: 7,184  |
So with all this interest rate increase talk we are currently hearing, my prediction is that the rates will rise in Q2 but at a modest level. I recently purchased my 1st property and I currently have a variable rate which is prime +.1 would it be better to lock in or stay at a variable rate for the long term? (2-5 years)
-------------------- |
 |
 
|
|
Mar 8 2010, 10:54 PM
Post
#2
|
|
 Group: REIN™ Members Posts: 1,829 Joined: 30-August 07 From: Chestermere, Alberta Member No.: 335 |
It would be better to have a Variable Rate Mortgage (VRM) at a rate more like Prime less 0.3%, which is what is widely available. It sounds like you might have an open VRM instead of a closed VRM, and unless it is a short term hold I don't recommend that product to my clients. The closed VRM pre-payment penalty is only 3 months interest.
-------------------- Garth Chapman
Diamond REIN member with several top-ten awards and two REIN Leadership Awards Mortgage Advisor - Residential, Multi-family, Commercial Jencor Mortgage Corporation garth@jencormortgage.com Investment Representative Axcess Capital garth@axcesscapital.com Creator- Real Estate Management & Analysis Software REMA garth@remacanada.ca |
|
|
|
|
Mar 9 2010, 10:03 AM
Post
#3
|
|
 Group: REIN™ Members Posts: 2,283 Joined: 10-October 07 From: Waterloo Member No.: 2,104 |
What Garth wrote
-------------------- Adam Hoffman - Hoffaco Property Management Waterloo - Rent / Consult / Manage - http://www.hoffaco.com
|
|
|
|
|
Mar 9 2010, 10:21 AM
Post
#4
|
|
|
Group: Forum Members Posts: 40 Joined: 5-June 09 From: Ottawa Member No.: 9,999 |
I was looking at that a few days ago... I decided to take a VRM for 5 years (closed) with a fixed payment on the investment mortgage. While I am getting a nice cash flow on the property I realized that once the interest is goes up; the payment will go mostly to interest instead of capital. I will be deposit the positive cash flow into my secured LC (I do not have a mortgage, I have a LC) so basically transferring the bad debt into the good debt... I am still paying debt but I decided to pay the bad one first...
any flaws on this scenario? QUOTE (lilbuffet @ Mar 8 2010, 10:20 PM)  So with all this interest rate increase talk we are currently hearing, my prediction is that the rates will rise in Q2 but at a modest level. I recently purchased my 1st property and I currently have a variable rate which is prime +.1 would it be better to lock in or stay at a variable rate for the long term? (2-5 years)
|
|
|
|
|
|
Lo-Fi Version | Time is now: 3rd September 2010 - 05:32 AM |
|
 |
|||||||||||||||||
|
|
||||||||||||||||||
