Ottawa Mortgage Interest Rates

It is fascinating to note that the rates for mortgages have not changed in months. Low interest rates mean that home buyers have access to relatively low borrowing rates. With the 5 year rate of about 3% you can easily calculate your monthly blended payment of a 100 thousand dollar mortgage. For each  thousand dollars it costs $4.75 a month interest and principal repayment. That translates to $475. dollars per 100 thousand borrowed per month. You can calculate your payment based on your need from this.

There are a few more factors that banks take into account when offering a mortgage pre-approval. They will have to know past credit history and the amount of down payment available for the purchase. They will want to see a minimum of 5% down payment with an additional 2% for closing costs. This approximate 7% of the closing costs must be cash or savings.

Call me about this.There is more you may need to know.

Bank Rates
Best Rates

Preferred October Mortgage rates

Mortgage rates are very important because they affect a buyer’s ability to purchase or refinance a home. The current posted rates below show a surprise in that the two year rate is now slightly better than the one year rate. The big news is that between the least expensive short tern rate and the long term rate there is a difference in payment of $238 per month per $100K.

So if you had a $300,000 mortgage and you choose the short term over the long term you would save  $714. per month. Sweet!

This is what it would look like:

300k mortgage per month carrying cost ten year term  = $2,055.

300K mortgage per month carrying cost two year term = $1,341.

Savings————————————————————–  = $   714.

Term             Bank Rates          Rates I like!

1 YEAR               3.50%              2.89%

2 YEARS             3.55%              2.49%

3 YEARS             4.05%              2.89%

4 YEARS              4.79%            2.99%

5 YEARS              5.29%             3.29%

7 YEARS              6.35%            4.49%

10 YEARS            6.75%            4.79%

Call for a personal evaluation on your ability to qualify for a mortgage. Once you know how much you can comfortably finance it makes it a lot more fun to go out an buy your house! 613-236-5959 ask for Martin Elder, Broker at Keller Williams Ottawa Realty

Mortgage Options to Consider Ouch!

           Current Mortgage Interest Rates Ottawa Feb 22, 2011               
                                          Term          Bank Rates    Attractive Rates
                                          1 YEAR           3.50%            2.64%
                                          2 YEARS         3.75%            3.29%
                                          3 YEARS         4.35%            3.59%
                                          4 YEARS         5.14%            3.84%
                                          5 YEARS         5.44%            3.94%
                                          7 YEARS         6.34%            4.94%
                                          10 YEARS       6.65%            5.15%
  • Let me comment on the two highlighted rates; the one year and the ten year rate. It’s a long time ten years and you notice the rate of interest doubles over that period. You will have paid more than twice the interest over the longer term if you choose the longer term. 

  • The monthly payments don’t appear to differ that much; one year $948. per month as opposed to the ten year monthly payment $1065. that’s about $100 dollars difference. So? You say; I can afford to pay more for peace of mind! Like,” I don’t want to loose my house if I run into difficulty or the rates skyrocket !” I understand your concern… and think about this…

  • So at the end of two years you’d have paid $4,803. interest and after the same period of time you’d pay $9,416. with the ten year rate. If $5000 is a lot of interest money then $10,000 is really a lot more money to have paid when it doesn’t buy much except a feeling of security and a great account balance for the lending institution. This is after two years only. Condider after eight more years the potential interest differencial could be astounding! Would it not be smart in the begining to pay double the monthly payment at the lowest rate so you pay off the principal sooner?

  • Ok, I know you say there’ll be changes in the rates every year and they will be going up so my simplistic comparison is inaccurate. You’re right, and if you always choose the lowest rate and after ten years you still choose the lowest rate then you’ll have paid off more principal owing and be better off financially. That’s the way I see mortgage decisions!

  • Some people may have personal circumstances. When it comes time to renew your mortgage call me. Let’s talk…

Save Your Money!

Terms            Bank Rates          Our Rates

1 YEAR           3.20%                  2.44%
2 YEARS         3.45%                  2.69%
3 YEARS         4.00%                  2.90%
4 YEARS         4.94%                  3.44%
5 YEARS         5.19%                  3.49%
7 YEARS         6.09%                  4.75%
10 YEARS       6.40%                  5.15%

Current mortgage interest rates have settled down to a prolonged,  low, factor that allows buyers to borrow substantial amounts of capital to purchase good homes. I say prolonged and predictable because over the last ten years rates have become more and more affordable. The origin of our low interest rates began with a world recession that started about 15 years ago. It appears that with the world economy still very sensitive to the US financial crisis of 2008 interest rates will remain low for the next 5 years because inflation rates are extremely low. Governments fear the chaos that inflationary prices have on political security and when inflation begins to rise they use an effective tool to keep inflation in check. They raise the prime borrowing rate charged to banks who in turn pass the interest rate hikes to the consumer. When borrowing become more expensive, consumer spending and speculation slows down too. Inflation is kept in check.

So the interest rate chart above shows a spread of less than two points between the one year and the ten year rate. This is called the interest rate spread. This means that you can borrow today at 2.44 % for one year but maybe because of fear there will be increases in the future you decide to pay a little extra to lock in at 5.15 %. What the heck, you can afford the small amount more and its worth the peace of mind. Right? This sounds fine now but who is to say that interest rates will skyrocket in the near future? It doesn’t seem logical that rates will explode upward when the spread is this flat. And what is the spread? Less than 3%! or, $146. more per monthly payment. Well, here’s what banks won’t tell you. Why not add the amount to your monthly payment in the begining. That way you save!

So what if rates go up? That will eventually happen but probably slowly and with lots of tell tale signs. What can you do if you have chosen the short term, least expensive rate? Consider these five points:

  • Your ability to pay off a mortgage increases over time.
  • You may have a pay raise.
  • Your principal amount borrowed will decrease year after year through your blended payments.
  • Say you invest your RRSP return in your mortgage principal taking off $10,000 per year; very smart by the way!
  • The net effect of these actions mitigates against choosing the more expensive long term interest rate because the amount you borrow decreases so that if and when the rates go up you pay the higher rate on the lower amount. So Save Your Money

Choose a shorter amortization instead of a long term interest rate. For example choose 23 years instead of 25 years. Invest the spread in your amortization. This will increase your payments but pay off the principal and interest sooner saving you money. When the year is up go for another year’s term and you will always benefit from the lowest interest rate available. The cumulative effect is you pay less and create wealth for yourself instead of the shush, b a n k. If for some reason you need to revert to the original amortization period you can renegotiate with the bank at the end of the year.

You have lots of bargaining power because the banks wants to keep steady customers. If for some reason you need to move or sell your house you will have more freedom because the interest term is shorter. How convenient when you want flexibility and affordability. 
My strategy is buy as much house as you can and then stretch some more. You’ll grow into the house in five years! Interest rates have not been this low in 30 years.

Comment on this post or send an email. I’ll offer my opinion if you’d like to talk about your approaching mortgage renewal.