Mortgage Rates Back At Historic Lows / Tax Breaks Available!
Many of you have already taken the opportunity to refinance during the past year benefitting from the historically low interest rates that we are currently experiencing.
Recent drops in fixed rates and now discounts below prime on variable rate products continue to provide consumers with great opportunities.
Just this month the Bank of Canada suggested that the prime rate will remain at 2.25% well into 2010
This means that those of you with a fixed mortgage rate above 5% may wish to consider refinancing before the anticipated rate jumps that are likely to hit in mid to late 2010 and into 2011.
So does it make sense to break your existing mortgage, incur the penalty and refinance? As a means of comparison, I’ll run through some scenarios using a $200,000 mortgage.
We will assume that there are 3 years remaining on the term and amortization is at 23 years. For comparison purposes we will maintain the current payment amount.
The chart below demonstrates that there may be an opportunity to save even after paying a relatively high penalty. Note penalty calculations differ between lenders so it is wise to double check if interested. In addition, choosing the variable product also allows you the option of locking into a fixed rate term, at anytime, should the prime rate start to climb more quickly than expected.
Contact us to run a full analysis of your unique situation.
Five year fixed rates are again below 4% after a bit of a spike this fall and the three year fixed rate is in the mid 3% range.
MICHAEL PEZZACK
MORTGAGE AGENT, AMP
OFFICE: 416-
CELL: 416-
TOLL FREE: 1-
michael@alltorontomortgages.com
How soon will mortgage rates increase?
Mark Carney and the Bank of Canada continue to suggest mid 2010 as the likely timeframe for rates to begin rising. How high and how quickly is still unknown. If the economy picks up speed and the recession dissipates then expect significant jumps. If the economy’s recovery is slower than anticipated then rates may only increase by a 1/2 or 3/4 of a percentage point.
Forecasts from Bay Street place the prime rate at 3.25% in a years time, 4.25% by December of 2011 and 4.85% in 2012.
Of course many of these same forecasters didn’t predict the credit crisis and subsequent recession. So take it all with a grain of salt. The economy is still in a precarious spot with massive stimulus spending and a fragile recovery on one side and inflationary and speculative asset bubble fears on the other, the result of low interest rates.
Strange days indeed.
Buying Block Mortgages Inc.
Mortgage Agent #: 08003302
Broker License #: 10645
Lenders typically charge the greater of an interest rate differential or 3 months interest as penalty to break existing mortgages. The estimated penalty on a $200,000 mortgage is somewhere between $7,000 and $10,000 depending on rates of lender, exact length of term remaining and method of calculation.
**Adjustable rate approximation over 3 years, allowing for full point increase of prime since current rate is only 2% (prime minus .25%). Possible if economy’s recovery is sluggish or high Canadian dollar slows Bank of Canada’s plans of raising prime rate.
If you’re going to the trouble to refinance it may also make sense to do some work around the home since the 2009 Federal Budget tax incentive only has a few months remaining.
Essentially, in order to further stimulate the economy, the 2009 budget allows for a 15% income tax credit on eligible home renovations over $1,000 and not exceeding $10,000. Homeowners can receive a tax credit of up to $1,350 to be used for a variety of improvements including energy retrofits, new bathrooms, backyard decks or even a hot tub!
Conservative Canadian lending regulations have kept real estate and sub prime woes in check compared to the States and our house values continue to rise. As a result there may be an opportunity to tap into the equity which has grown in your home in order to finance renovations or to lower your overall borrowing costs.
The Canadian Government created a valuable program last year to help Canadian homeowners:
The Home Renovation Tax Credit (HRTC ). For clients contemplating a renovation or
just about any type of home improvement this becomes the perfect time to follow-
NEWSLETTER WINTER 2009 / 2010
