Locked-in mortgage option looking more attractive

With today’s mortgage interest rate uncertainty, it’s a difficult task trying to decide whether or not to lock into a guaranteed, closed mortgage or risk taking on a variable rate mortgage term.

How long will the Bank of Canada actually hold their rate at one per cent?

While the current rates could be held as long as the end of 2012, many factors influence that decision.

Will inflation kick in sooner than expected? What about a more rapid pick up in the economy? Is our dollar going to continue to be the same value of the American dollar? Will the world economy strengthen?

It’s a matter of risk to reward. Are you a gambler on what will happen to mortgage rates or do you prefer a less risky road to follow?

When considering the variable rate mortgage we look at the difference in those rates, which are as low as prime minus .35 per cent on the variable (2.65 per cent as of today) or five and 10-year locked-in rates as low as 2.99 and 3.89 per cent respectively.

Yes, locked-in is a higher mortgage rate than a variable rate, but the difference is slight.

What has been stated in various news articles is that once mortgage rates do start climbing, it may or may not happen quickly. Nobody knows.

What it boils down to is, with today’s interest rate spreads between the variable closed and five-year guaranteed closed mortgage rates, the closed option can give you some financial stability within your home ownership budget.

As well, most mortgages are portable, which means should you decide to move into a different home down the road when the rates are significantly higher, you can transfer the existing lower rate mortgage to the new property.

And a portable mortgage transfer enables the buyer to also avoid paying out a penalty for closing the mortgage ahead of the maturity date.

It comes back, though, to what is your tolerance for risk when deciding your mortgage rate and your economic future.

Should you have any questions feel free to contact us at the information below or visit us on facebook under: Kelowna Home Mortgages Inc.

Of Prime Interest is a collaboration of Kelowna Home Mortgages Inc. mortgage professionals Darwyn Sloat (250-718-4117), ; Arlyne Wilson (250-862-1818); Trish Balaberde (250-470-8324),; and  Kristin Rosdal (250-878-3007)

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