My last post sparked off a flurry of of emails, phone calls, and inquiries about its content. In particular, the rates I quoted, and my rational for offering them were thrown into question by past clients, potential clients, other brokers, and even some of my family.
There are a few points that need to be addressed in order for this issue to be explored properly. First off, a list of the concerns that I received, in point form:
1. The product I am offering is not offered by a chartered bank (INCORRECT!)
2. The rate I am offering is not available at all brokers and banks (CORRECT!)
3. The article sounded like I was angry at other brokers for always advising clients that variable is best (CORRECT!)
4. The rate I am offering is below the variable rate mortgages, and this is an anomaly (CORRECT!)
5. The product and program I offer has lots of rules and conditions that not everyone qualifies for (CORRECT!)
Let’s address each in turn. First off, the rate I was quoting IS offered by a major chartered bank. In fact, in the last two days, another bank has also started offering a similar rate so the rate is out there in two chartered banks – not some “second floor” bank as one client suggested.
Is this rate offered by all brokers? No. From time time, banks will offer promotional specials (4.90% on a 5 year closed is such a promotion) that is the result of the broker sending them a lot of business or very high quality business. In these cases, the lender may elect to only offer it to their, say, top100 brokers. If the broker you are working with isn’t able to offer this rate, it doesn’t mean their advice is bad or not worth listening to, but suggests that they deal with other lenders. There is nothing wrong with this. There have been many times where I was unable to get the rates advertised by one broker, only to find out that broker sends lots of their business to that lender and they are being rewarded for it by being able to offer a better rate or better terms. In these cases, go with the rate and product you want. Go with whomever offers you the best advice and service. Bottom line: not every broker offers the same rates and products – if they did, why would anyone ever shop around online? Alternatively, give me a call and, if you qualify, I will set you up appropriately.
All the above being said, make sure you check the date on the broker’s site to ensure the rates you are looking at are current. I have seen many brokers be very lax about updating their websites.
Many people suggested I sounded angry in the last post, and they are correct. I am tired of people sticking to dogmatic principles when there are alternatives. Is a variable rate ALWAYS best? No. In times of increasing rates, variable rate mortgages can be financially devastating if people do not have sufficient room in their budget to absorb the higher payments. Also, just because you can convert to a fixed product out of a variable product offers you little protection. You rarely get to transfer across to the best rate in the market, and are beholden to that lender’s rates at that point in time. By the time variable rates have risen, fixed rates are often also higher. For example, if you are in a variable rate at 5% and the fixed rates are 5.50% you are sitting pretty. However, if that variable rate jumps to 5.60% and you try to lock in, you don’t get to lock in at 5.50% You lock in at whatever the rates are at that time, and they will likely be up over 6% at that point. This makes people “chase the market” and often results in them never actually pulling the trigger and getting out to a safer fixed term.
In changing and challenging financial times, you need to think outside the box. Period.
The concern that the rate I am offering is below prime, but that this is an anomaly is correct! What bearing does that have, however? You have to make decisions based on the best information available to you today. The variable rate offers you a small amount of “what if” protection as falling rates get you lower payments, but often results in you “chasing the market” in an upward cycle. Are variable rates historicaly better? In the past 8 years they sure as heck are! However, when rates have no room down, and a lot of room upwards, where would you rather be? In times of increasing rates, variable is not the place to be. So you need to ask your broker, what point in the cycle are we at now? With prime rate at 4% and poised to dip a little more, do you think we are near the top (with lots of downward rate room) or near the bottom (with lots of upward room)?
The last concern voiced was that the product I offer has lots of requirements to qualify for it and not everyone can get it. My answer? So what! ALL mortgage rates you see posted at ALL banks have a myriad of terms and conditions and guidelines that have to be followed. Just because, say, Royal Bank is offering 4.85% on a five year fixed mortgage, does that mean ALL customers going in there will get that rate? NO! Obviously not. They have to qualify for it. The rates I offer are no different.
I hope that addresses the web of concerns that people have voiced. As of today, the variable rate mortgage dropped to Prime + 0.60% for a net rate of 4.60% which now puts it as a lower priced option that the 4.90% I offer on a fixed rate. So is variable better? Ask your broker. If they don’t ask you lots of questions about your income, future plans, future expenses, and risk tolerance, then they haven’t done their job.
Ultimately, it comes down to affordability, and risk tolerance. If you can afford the variable rate (and that includes the RISK) then go ahead and take it and you may save lots of money. I hope you do! That is what my service is all about.
~ by merc359 on November 26, 2008.
Posted in Home Buyer Info, Market Commentary, Mortgage Myths
Tags: adjustable mortgage, ARM, bank foreclosure, bank of canada, bank of canada prime rate, best mortgage rates, best rates in canada, buy and flip, buy and flip house, buy foreclosure, buy foreclosure canada, buy pre-foreclosure, buy pre-foreclosure canada, canada best rates, canada foreclosure, canada mortgage broker, canada pre-foreclosure, difficult financing, find canada foreclosure, find canada pre-foreclosure, finding foreclosures, finding pre-foreclosures, fixed rate mortgage, floating mortgage, foreclosure, locked in mortgage, morgage broker vancouver vancouver morgage broker, mortgage broker, mortgage broker vancouver, poor credit morgage, poor credit mortgage, pre foreclosure, prime rate trends, private construction financing, private construction morgage, private construction mortgage, private constuction loan, private financing, private financing vancouver, private morgage, private morgage vancouver, private mortgage, private mortgage vancouver, rowan smith, vancouver construction financing, vancouver construction loan, vancouver mortgage broker, vancouver private financing, vancouver private morgage, vancouver private mortgage, variable rate mortgage, variable versus fixed, variable versus fixed mortgage, variable vs fixed, variable vs fixed mortgage, VRM, VRM definition, VRM versus fixed, VRM vs fixed, what is pre foreclosure
Variable vs. Fixed Mortgages Part 2 – A Follow Up
My last post sparked off a flurry of of emails, phone calls, and inquiries about its content. In particular, the rates I quoted, and my rational for offering them were thrown into question by past clients, potential clients, other brokers, and even some of my family.
There are a few points that need to be addressed in order for this issue to be explored properly. First off, a list of the concerns that I received, in point form:
1. The product I am offering is not offered by a chartered bank (INCORRECT!)
2. The rate I am offering is not available at all brokers and banks (CORRECT!)
3. The article sounded like I was angry at other brokers for always advising clients that variable is best (CORRECT!)
4. The rate I am offering is below the variable rate mortgages, and this is an anomaly (CORRECT!)
5. The product and program I offer has lots of rules and conditions that not everyone qualifies for (CORRECT!)
Let’s address each in turn. First off, the rate I was quoting IS offered by a major chartered bank. In fact, in the last two days, another bank has also started offering a similar rate so the rate is out there in two chartered banks – not some “second floor” bank as one client suggested.
Is this rate offered by all brokers? No. From time time, banks will offer promotional specials (4.90% on a 5 year closed is such a promotion) that is the result of the broker sending them a lot of business or very high quality business. In these cases, the lender may elect to only offer it to their, say, top100 brokers. If the broker you are working with isn’t able to offer this rate, it doesn’t mean their advice is bad or not worth listening to, but suggests that they deal with other lenders. There is nothing wrong with this. There have been many times where I was unable to get the rates advertised by one broker, only to find out that broker sends lots of their business to that lender and they are being rewarded for it by being able to offer a better rate or better terms. In these cases, go with the rate and product you want. Go with whomever offers you the best advice and service. Bottom line: not every broker offers the same rates and products – if they did, why would anyone ever shop around online? Alternatively, give me a call and, if you qualify, I will set you up appropriately.
All the above being said, make sure you check the date on the broker’s site to ensure the rates you are looking at are current. I have seen many brokers be very lax about updating their websites.
Many people suggested I sounded angry in the last post, and they are correct. I am tired of people sticking to dogmatic principles when there are alternatives. Is a variable rate ALWAYS best? No. In times of increasing rates, variable rate mortgages can be financially devastating if people do not have sufficient room in their budget to absorb the higher payments. Also, just because you can convert to a fixed product out of a variable product offers you little protection. You rarely get to transfer across to the best rate in the market, and are beholden to that lender’s rates at that point in time. By the time variable rates have risen, fixed rates are often also higher. For example, if you are in a variable rate at 5% and the fixed rates are 5.50% you are sitting pretty. However, if that variable rate jumps to 5.60% and you try to lock in, you don’t get to lock in at 5.50% You lock in at whatever the rates are at that time, and they will likely be up over 6% at that point. This makes people “chase the market” and often results in them never actually pulling the trigger and getting out to a safer fixed term.
In changing and challenging financial times, you need to think outside the box. Period.
The concern that the rate I am offering is below prime, but that this is an anomaly is correct! What bearing does that have, however? You have to make decisions based on the best information available to you today. The variable rate offers you a small amount of “what if” protection as falling rates get you lower payments, but often results in you “chasing the market” in an upward cycle. Are variable rates historicaly better? In the past 8 years they sure as heck are! However, when rates have no room down, and a lot of room upwards, where would you rather be? In times of increasing rates, variable is not the place to be. So you need to ask your broker, what point in the cycle are we at now? With prime rate at 4% and poised to dip a little more, do you think we are near the top (with lots of downward rate room) or near the bottom (with lots of upward room)?
The last concern voiced was that the product I offer has lots of requirements to qualify for it and not everyone can get it. My answer? So what! ALL mortgage rates you see posted at ALL banks have a myriad of terms and conditions and guidelines that have to be followed. Just because, say, Royal Bank is offering 4.85% on a five year fixed mortgage, does that mean ALL customers going in there will get that rate? NO! Obviously not. They have to qualify for it. The rates I offer are no different.
I hope that addresses the web of concerns that people have voiced. As of today, the variable rate mortgage dropped to Prime + 0.60% for a net rate of 4.60% which now puts it as a lower priced option that the 4.90% I offer on a fixed rate. So is variable better? Ask your broker. If they don’t ask you lots of questions about your income, future plans, future expenses, and risk tolerance, then they haven’t done their job.
Ultimately, it comes down to affordability, and risk tolerance. If you can afford the variable rate (and that includes the RISK) then go ahead and take it and you may save lots of money. I hope you do! That is what my service is all about.
~ by merc359 on November 26, 2008.
Posted in Home Buyer Info, Market Commentary, Mortgage Myths
Tags: adjustable mortgage, ARM, bank foreclosure, bank of canada, bank of canada prime rate, best mortgage rates, best rates in canada, buy and flip, buy and flip house, buy foreclosure, buy foreclosure canada, buy pre-foreclosure, buy pre-foreclosure canada, canada best rates, canada foreclosure, canada mortgage broker, canada pre-foreclosure, difficult financing, find canada foreclosure, find canada pre-foreclosure, finding foreclosures, finding pre-foreclosures, fixed rate mortgage, floating mortgage, foreclosure, locked in mortgage, morgage broker vancouver vancouver morgage broker, mortgage broker, mortgage broker vancouver, poor credit morgage, poor credit mortgage, pre foreclosure, prime rate trends, private construction financing, private construction morgage, private construction mortgage, private constuction loan, private financing, private financing vancouver, private morgage, private morgage vancouver, private mortgage, private mortgage vancouver, rowan smith, vancouver construction financing, vancouver construction loan, vancouver mortgage broker, vancouver private financing, vancouver private morgage, vancouver private mortgage, variable rate mortgage, variable versus fixed, variable versus fixed mortgage, variable vs fixed, variable vs fixed mortgage, VRM, VRM definition, VRM versus fixed, VRM vs fixed, what is pre foreclosure