Ultra-Low Interest Rates
Tara Gentles • September 22, 2020
Chances are if you’ve been paying attention to the news as the Canadian economy continues to work through the COVID-19 pandemic, you’ve heard that interest rates are at an all-time low. And it would appear that they will remain low for a while. In fact, the Bank of Canada recently hinted that they don’t expect rates to go up until at least 2023. That’s good news if you need to borrow money!
So what does this mean for you?
Well, if you are borrowing money for really any reason, you’ll most likely be paying lower interest for the foreseeable future, including any secured line of credits, car loans, student loans, and personal loans. As for mortgage financing, you’ve got options!
If you’re an existing variable rate mortgage holder,
the prime rate is currently 2.45%. You are paying that, plus or minus a component to prime. The variable rate spread is presently coming down at several lenders, so if you’d like to have a look at your mortgage to see if a refinance makes sense to save you money, please contact me anytime.
If you’re a fixed rate mortgage holder,
this means there could be a pretty significant penalty for breaking your existing mortgage. However, depending on the time remaining on your current term, and the rate you are currently paying, it might make sense to break your existing mortgage, pay the penalty, and refinance into a lower rate. There is no cost to run the numbers. If we can save you money in the long term on your mortgage, it might make sense to refinance. Now, depending on the terms of your mortgage, it might make sense to wait a year or two to refinance, but we won’t know that until we look at the details. I am more than happy to provide you with several financial scenarios.
If you’re currently looking to purchase a property
and you’re seeking new mortgage financing, you should know that although interest rates are at an all-time low, the government of Canada forces you to qualify at what they call the qualifying rate which is currently 4.79%. So while you can find a five year fixed rate around 2% now, you have to prove that you can afford double that amount in interest. The idea here is that it protects you against a rate hike when your term is complete. Unfortunately, it leaves you qualifying for a considerably lower mortgage amount now.
So is now a good time to refinance or buy?
Well, that depends on your financial situation. But there is nothing wrong with taking a look and putting together a mortgage application to assess your situation. I would love to work with you so that you can take advantage of these low interest rates. Please contact me anytime!
Tara Gentles
CANADIAN MORTGAGE EXPERT
RECENT POSTS
When arranging mortgage financing, your mortgage lender will register your mortgage in one of two ways. Either with a standard charge mortgage or a collateral charge mortgage. Let’s look at the differences between the two. Standard charge mortgage This is your good old-fashioned mortgage. A standard charge mortgage is the mortgage you most likely think about when you consider mortgage financing. Here, the amount you borrow from the lender is the amount that is registered against the title to protect the lender if you default on your mortgage. When your mortgage term is up, you can either renew your existing mortgage or, if it makes more financial sense, you can switch your mortgage to another lender. As long as you aren’t changing any of the fine print, the new lender will usually cover the cost of the switch. A standard charge mortgage has set terms and is non-advanceable. This means that if you need to borrow more money, you'll need to reapply and requalify for a new mortgage. So there will be costs associated with breaking your existing mortgage and costs to register a new one. Collateral charge mortgage A collateral charge mortgage is a mortgage that can have multiple parts, usually with a re-advanceable component. It can include many different financing options like a personal loan or line of credit. Your mortgage is registered against the title in a way that should you need to borrow more money down the line; you can do so fairly easily. A home equity line of credit is a good example of a collateral charge mortgage. Unlike a standard charge mortgage, here, your lender will register a higher amount than what you actually borrow. This could be for the property's full value, or some lenders will go up to 125% of your property's value. In the future, if the value of your property appreciates, with a collateral charge mortgage, you don't have to rewrite your existing mortgage to borrow more money (assuming you qualify). This will save you from any costs associated with breaking your existing mortgage and registering a new one. However, if you’re looking to switch your mortgage to another lender at the end of your term, you might be forced to discharge your mortgage and incur legal fees. Also, by registering your mortgage with a collateral charge, you potentially limit your ability to secure a second mortgage. So what’s a better option for you? Well, there are benefits and drawbacks to both. Finding the best option for you really depends on your financial situation and what you believe gives you the most flexibility. This is probably a question better handled in a conversation rather than in an article. With that said, undoubtedly, the best option is to work with an independent mortgage professional. It’s our job to understand the intricacies of mortgage financing, listen to and assess your needs, and recommend the best mortgage to meet your needs. As we work with many lenders, we can provide you with options. Don’t get stuck dealing with a single institution that may only offer you a collateral charge mortgage when what you need is a standard charge mortgage. So if you’d like to have a conversation about mortgage financing, please get in touch. It would be a pleasure to work with you and answer any questions you might have.
Wondering If Now’s the Right Time to Buy a Home? Start With These Questions Instead. Whether you're looking to buy your first home, move into something bigger, downsize, or find that perfect place to retire, it’s normal to feel unsure—especially with all the noise in the news about the economy and the housing market. The truth is, even in the most stable times, predicting the “perfect” time to buy a home is incredibly hard. The market will always have its ups and downs, and the headlines will never give you the full story. So instead of trying to time the market, here’s a different approach: Focus on your personal readiness—because that’s what truly matters. Here are some key questions to reflect on that can help bring clarity: Would owning a home right now put me in a stronger financial position in the long run? Can I comfortably afford a mortgage while maintaining the lifestyle I want? Is my job or income stable enough to support a new home? Do I have enough saved for a down payment, closing costs, and a little buffer? How long do I plan to stay in the property? If I had to sell earlier than planned, would I be financially okay? Will buying a home now support my long-term goals? Am I ready because I want to buy, or because I feel pressure to act quickly? Am I hesitating because of market fears, or do I have legitimate concerns? These are personal questions, not market ones—and that’s the point. The economy might change tomorrow, but your answers today can guide you toward a decision that actually fits your life. Here’s How I Can Help Buying a home doesn’t have to be stressful when you have a plan and someone to guide you through it. If you want to explore your options, talk through your goals, or just get a better sense of what’s possible, I’m here to help. The best place to start? A mortgage pre-approval . It’s free, it doesn’t lock you into anything, and it gives you a clear picture of what you can afford—so you can move forward with confidence, whether that means buying now or waiting. You don’t have to figure this out alone. If you’re curious, let’s talk. Together, we can map out a homebuying plan that works for you.
