REVIEWSBuying
On September 7th, 2022 the Bank of Canada announced an interest rate hike of 75 basis points with the potential to see further hikes at the next announcements in October and December. The banks quickly followed to increase their rates by the same amount.
What does this mean for you?
Are you a Buyer Starting the Buying Process?
Getting pre-approved for a mortgage before house hunting is vital. Without it, it’s like showing up to play a hockey game without skates. With another potential rate hike, it’s worth working with a mortgage broker to discuss your financing options.
Variable Rate Mortgages with a Static Payment
If your mortgage payments do not change when the prime lending rate changes, chances are you have a static payment. What does a static payment mean? Basically, your payment is made of an interest and principle component. If the interest rate increases to a point where your interest portion exceeds your total payment this is called a “Trigger point.”
Variable Rate Mortgage
If you have a mortgage that adjusts to the change in the prime lending rate, then chances are your payment has increased recently. For every $100,000 your payments will increase by $39. If you have a mortgage of $500,000 your payments will increase by $195 monthly ($39*5).
The mortgage payment will change in lockstep with the interest rate hikes, unlike Variable Rate mortgages where payments do not change. ARM payments will increase by $39 for every $100K, meaning that a mortgage of $500K will increase by $195/month. If this is worrying, email me to discuss fixed conversion.
Is your Mortgage set to renew in the next year?
We recommend speaking with your mortgage representative if your mortgage is set to renew in the next year. The next Bank of Canada Announcements are on Oct 6th and December 7th with the anticipation of further hikes.
Are you looking to renovate your Home?
Now may be a great time to explore refinancing options including increasing your amortization for increased cash flow. This is also a great option if you are looking to consolidate debt.
Do you have more questions about the recent interest rate increases or buying a home in South Etobicoke? Contact us today at (416) 319-6893 or book a meeting right here to get the answers you’re looking for.
