I have been fielding on average some 45 calls per day, since the news that oil price increases will create inflation and that the cure for inflation is higher interest rates.   If you share the opinion of the masses, and you feel rates are on the rise, this article should be of use to you.  I don't necessarily share the belief we are going to experience interest rates in the double digits, however I can empathize that budget conscious families must do something to protect themselves.

We can still get mortgage rates reserved for up to 4 months (some conditions apply).   If you are thinking of buying this year, it may be a good idea to start shopping now with the intent to close on your purchase within the next 120 days, to take advantage of rate guarantees.  If your purchase date is going to be later than 120 days, then, depending on your down payment, it may be to your advantage to get the vendor of the property to secure a new mortgage, which you would assume when taking possession. The lender that guarantees the rate for 4 months is not the lender with the best rates, but as the closing date becomes closer, you may elect to change lenders at that point, although you may experience a small penalty for not having taken the money that had been reserved for you.

If you are renewing this year, or next, and your present rate is superior to the advertized rates, it may be a good idea to pay a penalty to get out of your present mortgage in order to secure a new one for a new five year term while the rates are still relatively low.  Most mortgage companies have a penalty clause set up that will allow you to leave or close your mortgage early subject to the greater  of: a three month interest penalty, or the rate differential between your existing rate and the new rate.   If your present rate is inferior to what is being offered today, and you have at least one year left in your term, I would not recommend changing at this time.

If you are thinking of selling your house this year, it may be to your advantage to renegotiate your mortgage now.  Increase the amount to at least 75% of the value, shop for the greatest discount you can find, and use the lower rate in your advertizing to attract potential purchasers, who would be willing to assume your mortgage. If the new purchasers were to require more money than what you had to offer, the lending institution that renegotiated your mortgage would be more than willing to increase the mortgage dollars, and blend the interest rate to effectively give the lower rate to your purchasers. On the other hand, you never know what the market is going to do, so as an alternative to spending money for legal fees and appraisal fees, etc. (necessary during renegotiating for the purpose of drawing equity), you may elect to advertize your willingness to "buydown" the rate of interest on a mortgage.  When the perspective purchaser shows up wanting a lower rate than the bank is offering, you simply agree to pay the difference between the going rate and the rate your purchaser wants to pay.  The easiest way of calculating the cost is to consider paying 1% of the mortgage amount for every 1/4% discount on a five year term mortgage.  In other words, if the new mortgage is $100,000, it would cost the homeowner $1000 for every 1/4% lowering of the rate.  Interest rates may be on the rise, but Ottawa Sun readers now know how to beat the system.