Mortgage renewal coming up this year? Buying a home for Christmas?

Wondering where interest rates going? I believe that the closer we get to the "R" question in Quebec, the higher the rates will climb. Notwithstanding Premier Parizeau's "business as usual", if the Yes side gets a grip in the polls, the dollar will start to fall. To protect the buck, the Government will raise investment rates. In turn, you will see interest rates climb. If the No side is winning, I feel that rates will stay stable until the end of October, and then climb. The latter escalation will be caused by the Federal Government's announcement last year that the Canada Savings Bond rate will be 6.75% this year, and 7.50% in 1996. As a result of higher investment rates, mortgage rates must follow suite. So either way, the rates are going up. Plan ahead to hedge against the higher rate affecting you. Lenders are bending over backwards to get your business, so negotiate.

Lenders will now almost automatically lock in an interest rate for up to 90 days on a renewal. If your mortgage comes due for renewal in December, your present lender probably won't accommodate you with a rate guarantee, but other lenders will! Go get yourself approved with a competitor's 90 day rate guarantee. When you receive your mortgage renewal agreement from your present lender, if their rate is better than the competitor's, stay where you are. If the competitor's rate is better than your present lender, then switch your mortgage to the new lender. That will keep the whole system honest.

If you plan on buying a home in the foreseeable future, whether new or existing housing, ask the Vendor of the property for a mortgage that is better than current rates. No matter if the Vendor is a new home contractor, or the neighbour next door, the rate of interest can be bought down to an acceptable level. The term "buydown" is simply prepaying a portion of the interest before you start. This trick has been used for years by new home contractors. It can be used by you in your negotiations with any purchase. Simply put, you are asking the Vendor of the property to set aside an amount of money to prepay the interest on your mortgage. The formula for calculating the cost of the buydown is well known in the industry. Call us for a quote. Always pick a term⁽¹⁾ of three years or longer in order to create stability within the mortgage. On a purchase, you can get rate guarantees for up to six months. Rates may be going up, but if you play the game correctly, they will not effect you.

1. Term...the period of time over which the rate & payments are guaranteed not to change.