During this week’s edition of Women & Money Montreal’s weekly Zoom session, we reviewed commonly used mortgage terms as well as crunched the current fixed and variable rate mortgage numbers.
In case you missed it check out the video recap here. Remember to click Subscribe on our YouTube channel!
Here were some of the questions asked during our Q&A period after the presentation.
You mentioned the Bank of Canada has a rate announcement 8 times a year, does this mean the variable rate changes 8 times a year? Yes and no. Technically it can, but it usually doesn’t. Pre-COVID, rate remained fairly steady and there wasn’t much fluctuation throughout the year when it came to the Bank of Canada’s key lending rate. This changed drastically during COVID as the Bank of Canada was juggling the uncertainty of the global pandemic while still encouraging economic spending, as well as battling the hot real estate market.
Let’s say you take a 5 year variable rate mortgage and rates start to drop, at what point during the term does it make it worth it to have a variable rate? For example, if the rate only drops six months before the end of the term, was it worth it? It’s hard to say but it really depends how far along you are in your mortgage and the remaining balance. We have to remember that drastic rate drops and increases are only a segment of your entire mortgage.
Can you ask for a home equity line of credit even if you are finished paying off for your home? Absolutely and in fact, having a home equity line of credit is recommended to help deter acts of title fraud on your property. Home equity lines of credit are approved based on the value of your home (typically up to 65% of its fair market value minus any existing mortgages owing) and your capacity to repay the loan (i.e. your income, credit score, and any other debts owing).
Why would someone have an open mortgage instead of a closed mortgage? An open mortgage is usually a temporary solution until you lock into a closed mortgage. For example, it isn’t uncommon for a borrower to choose an open mortgage when their term it renewing and they are shopping around for a new mortgage. Perhaps their financial documents aren’t in order and they need some extra time, or they waited too long to start shopping around and once again, need a little bit of extra time. Open mortgage rates are higher than closed mortgages and there is no penalty or rules around prepayment. Most mortgages are closed, with specific terms to the mortgage, prepayment rules, and penalties to break the term.
Lin Sok is an Independent Financial Security Advisor and Mortgage Broker. To discuss insurance, investment, or mortgage questions related to your own situation, feel free to connect here.