Expert: Derek Hamilton - 12/11/2009

Question
Hi,

I am in the process of getting a new mortgage for my home purchase. I have been offered a closed variable rate at prime minus 0.1. Do you feel this is a good rate for this time?

One other alternative I have is to get a open variable rate at prime plus 0.4 and wait for the plus/minus part to improve over the next 4-5 months. I have heard that April or May might see variable rates at prime minus 0.5. Do you think that the variable rate will improve in the spring? Is it difficult to go from an open variable to a closed variable without penalties? I'm not really sure how open variables work...

This is all quite confusing for me. Maybe I should just go with a 5 year fixed at 4.00%? Well, I'm rambling now but any advice you can give me will be greatly appreciated.

Best regards,
Andersen

Answer
Dear Andersen,

 If you are on a fixed income and know that you will be in the property for a min.  of 5 years. It may be time to lock into a five year term and take advantage of these historically low interest Rates. You will know exactly what you're dealing with for five years.
Saying that, I personally have never locked into a long term rate. For the last ten years I have had a variable Rate and it's worked out very well. A saving of thousands of dollars. I have instructed many of my clients to go variable as well. You can go with an open variable Rate Mortgage now and then if it looks like the Rates are going to go up more than 1% you can lock in later ? You should think about your long term plan and talk to a Mortgage Specialist about your own living situation. Again,I am not a Mortgage Broker.
You can call or e-mail a Mortgage Broker that works in our office in Toronto, or speak with someone you know in the business. He or she is in a much better position to answer all of your questions relating to different Mortgages. Good luck!!

Mortgage Adviser:
Robert Gascon 416 410-3123
rgascon@redwoodmortgage.ca

Thanks,
Derek Hamilton