Ultra-Low Interest Rates
Diane Gogar • September 2, 2020
Chances are if you’ve been paying attention to the news as the Canadian economy continues to work through the COVID-19 pandemic, you’ve heard that interest rates are at an all-time low. And it would appear that they will remain low for a while. In fact, the Bank of Canada recently hinted that they don’t expect rates to go up until at least 2023. That’s good news if you need to borrow money!
So what does this mean for you?
Well, if you are borrowing money for really any reason, you’ll most likely be paying lower interest for the foreseeable future, including any secured line of credits, car loans, student loans, and personal loans. As for mortgage financing, you’ve got options!
If you’re an existing variable rate mortgage holder, the prime rate is currently 2.45%. You are paying that, plus or minus a component to prime. The variable rate spread is presently coming down at several lenders, so if you’d like to have a look at your mortgage to see if a refinance makes sense to save you money, please contact me anytime.
If you’re a fixed rate mortgage holder,
this means there could be a pretty significant penalty for breaking your existing mortgage. However, depending on the time remaining on your current term, and the rate you are currently paying, it might make sense to break your existing mortgage, pay the penalty, and refinance into a lower rate. There is no cost to run the numbers. If we can save you money in the long term on your mortgage, it might make sense to refinance. Now, depending on the terms of your mortgage, it might make sense to wait a year or two to refinance, but we won’t know that until we look at the details. I am more than happy to provide you with several financial scenarios.
If you’re currently looking to purchase a property
and you’re seeking new mortgage financing, you should know that although interest rates are at an all-time low, the government of Canada forces you to qualify at what they call the qualifying rate which is currently 4.79%. So while you can find a five year fixed rate around 2% now, you have to prove that you can afford double that amount in interest. The idea here is that it protects you against a rate hike when your term is complete. Unfortunately, it leaves you qualifying for a considerably lower mortgage amount now.
So is now a good time to refinance or buy?
Well, that depends on your financial situation. But there is nothing wrong with taking a look and putting together a mortgage application to assess your situation. I would love to work with you so that you can take advantage of these low interest rates. Please contact me anytime!
There is no doubt about it, buying a home can be an emotional experience. Especially in a competitive housing market where you feel compelled to bid over the asking price to have a shot at getting into the market. Buying a home is a game of balancing needs and wants while being honest with yourself about those very needs and wants. It’s hard to get it right, figuring out what’s negotiable and what isn’t, what you can live with and what you can’t live without. Finding that balance between what makes sense in your head and what feels right in your heart is challenging. And the further you are in the process, the more desperate you may feel. One of the biggest mistakes you can make when shopping for a property is to fall in love with something you can’t afford. Doing this almost certainly guarantees that nothing else will compare, and you will inevitably find yourself “settling” for something that is actually quite nice. Something that would have been perfect had you not already fallen in love with something out of your price range. So before you ever look at a property, you should know exactly what you can qualify for so that you can shop within a set price range and you won’t be disappointed. Protect yourself with a mortgage pre-approval. A pre-approval does a few things It will outline your buying power. You will be able to shop with confidence, knowing exactly how much you can spend. It will uncover any issues that might arise in qualifying for a mortgage, for example, mistakes on your credit bureau. It will outline the necessary supporting documentation required to get a mortgage so you can be prepared. It will secure a rate for 30 to 120 days, depending on your mortgage product. It will save your heart from the pain of falling in love with something you can’t afford. Obviously, there is nothing wrong with looking at all types of property and getting a good handle on the market; however, a pre-approval will protect you from believing you can qualify for more than you can actually afford. Get a pre-approval before you start shopping; your heart will thank you. If you’d like to walk through your financial situation and get pre-approved for a mortgage, let’s talk. It would be a pleasure to work with you!
Refinancing your mortgage can be a smart financial move, but how do you know if it’s the right time? Whether you’re looking to lower your monthly payments, access home equity, or consolidate debt, refinancing can offer valuable benefits. Here are five key signs that it might be the right time to refinance your mortgage in Canada. 1. Interest Rates Have Dropped One of the most common reasons Canadians refinance is to secure a lower interest rate. Even a small decrease in your mortgage rate can lead to significant savings over time. If rates have dropped since you took out your mortgage, refinancing could help you reduce your monthly payments and save thousands in interest. ✅ Tip: Check with your mortgage broker to compare your current rate with today’s market rates. 2. Your Financial Situation Has Improved If your credit score has increased or your income has stabilized since you first got your mortgage, you might qualify for better loan terms. Lenders offer lower rates and better conditions to borrowers with strong financial profiles. ✅ Tip: If you’ve paid off debts, improved your credit score, or increased your savings, refinancing could work in your favour. 3. You Want to Consolidate High-Interest Debt Carrying high-interest debt from credit cards, personal loans, or lines of credit? Refinancing can help consolidate those debts into your mortgage at a much lower interest rate. This can make monthly payments more manageable and reduce the overall cost of borrowing. ✅ Tip: Make sure the savings from refinancing outweigh any prepayment penalties or fees. 4. You Need to Free Up Cash for a Major Expense Many Canadians refinance to access their home’s equity for renovations, education costs, or major life expenses. With home values rising in many areas, a refinance could help you tap into that value while still keeping manageable payments. ✅ Tip: Consider a home equity line of credit (HELOC) if you need flexible access to funds. 5. Your Mortgage Term is Ending, and You Want Better Terms If your mortgage is up for renewal, it’s the perfect time to explore refinancing options. Instead of simply accepting your lender’s renewal offer, compare rates and terms to see if you can get a better deal elsewhere. ✅ Tip: A mortgage broker can help you shop around and negotiate better terms on your behalf. Is Refinancing Right for You? Refinancing isn’t always the best move—there can be penalties for breaking your current mortgage, and not all savings are worth the switch. However, if you relate to any of the five signs above, it’s worth discussing your options with a mortgage professional. Thinking about refinancing? Let’s chat and find the best option for you!
