April 1, 2020

If you are wondering what to do in today’s mortgage market, this cheat sheet should help.

Keep in mind that banks are stretched with energy losses, and less creditworthy business and consumer borrowers overall.  All banks, including Canadian banks, are considered riskier than they were a month ago.

When banks are borrowing at higher rates, you can safely bet this ‘risk premium’ gets passed on to bank customers.  The bottom line is that despite bond yields falling and Bank of Canada cutting interest rates, mortgage rates are heading higher for the foreseeable future.

Existing Variable Rate Borrower – you’ve seen the rate on your mortgage drop 1.5% in the month of March as lenders have dropped their prime rate from 3.95% to 2.45%.  Shout out to all the clients paying less than 1.5% on your mortgage.  Well played.

Existing Fixed Rate Borrower – with low rates today it can make sense to do the math and see if your savings exceeds your penalty.  Each lender has a different calculation of prepayment penalties.

Today, I am moving a client from a fixed rate of 3.29% to a 1.60% variable rate.  He is paying 3 months in interest penalty (0.8225%) and saving 6.76% of his mortgage balance over the next 4 years, works out to total savings of $29,687.50 on a $500,000 mortgage, not bad for about 30 minutes of paperwork.

New Buyers or Renewing a mortgage in the short term – take full advantage of 120 pre-approval period, don’t wait for your renewal offer in the mail.  This strategy alone can save clients 0.5% or more in periods of market volatility and rising rates.

Stretched borrowers – cash flow is king, refinancing can make sense to improve your cash flow, including looking at interest only options.  Don’t wait until its raining to reach for your umbrella.  The best time to access home equity or get a mortgage is when you don’t need it.

Keep safe.

Any questions, call Kevin @ 416-769-1440 or kevin@kevinbell.ca

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