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First Rate A newsletter specifically designed to keep you updated on interest rate trends |
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UPCOMING EVENTS: June 13, 2007 - Riley Park CC Please email me at johnso@bcmortgage.ca for more information.
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March 2007
Dear Homeowner,
As a homeowner (or prospective homeowner), investor or real estate professional, you rely on your mortgage professional to keep you informed about interest rate movements and trends. This newsletter is designed to do just that.
If you don't find value in this email, please send me a quick email so I can remove you from this email list. Thank you.
In this issue:
- Market commentary and Interest rate trends
- Can you benefit from a longer amortization
Market commentary & Interest rate trends
As expected, the Bank of Canada left the overnight rate unchanged at 4.25%. The bank felt that inflation risks were "balanced". The downside risk is that the US economy could be slower than expected. The upside risk is that that in Canada household spending could increase because of increased borrowings from home equity.
Interest rates will be stable for the next 3-9 months. Which ever strategy you've chosen, fixed or variable, there's no need to re-adjust your view at this time.
Rates and Charts
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Prime @ 6.0% (next review on Apr 24, 2007)
Term
Jan 19
Jan 26
Feb 2
Feb 9
Feb 16
Feb 23
Today
3 year
5.15%
5.15%
5.30%
5.24%
5.24%
5.24%
5.24%
5 year
5.09%
5.09%
5.24%
5.24%
5.24%
5.24%
5.24%
10 year
5.60%
5.60%
5.64%
5.64%
5.64%
5.64%
5.64%
Table shows the discounted residential mortgage rates for 3, 5 and 10 yr closed fixed rate mortgages
For a longer term view, click here to see the 3, 5 & 10 year best residential rate since September 2003 (updated monthly)
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Click to view other relevant graphs
Can you benefit from a longer amortization?
There are many reasons why borrowers opt for longer amortization mortgages. For one, this allows borrowers to qualify to purchase a larger home. Secondly, with lower mortgage payments, makes the payments easier for borrowers.
There's a BETTER reason why someone who could easily afford a 25 year amortization should consider a 40 year amortization mortgage. This is to build an investment portfolio and take advantage of tax benefits from making RRSP contributions.
Let me illlustrate. If you took out a $300K / 25 year amortization mortgage, your payments would be $1,796 per month (@5.3% interest). The payments on the same mortgage on a 40 year amortization payment plan would be $1,495 per month. What if. instead of taking the 25 year mortgage, you took the 40 year amortization mortgage and invested the difference of $301 ($1796 less $1,495) in a RRSP savings plan. Assuming a 30% tax bracket and an 8% Return on Investments (ROI), your networth would be higher by $185K in 25 years.
If you took this plan further by taking out an Interest-Only mortgage, your networth would increase by $282K.
This strategy will only work for borrowers who have the discipline to invest the difference in monthly payments. If you're looking to achieve financial security and a larger net worth, this is a strategy you need to consider. Talk to your financial advisor about this approach. On the other hand, if you are the type to spend the difference, you're better off to take the shortest payment plan and make bi-weekly payments.
Please call or email me to discuss how you can use your mortgage as a tool to build your wealth and financial security.
Attend our upcoming seminar on how to make your mortgage tax deductible. Click here for details:
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Please consider the information provided in this newsletter as general information. Before you do anything consult a professional.
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