The common theme for when 5-year fixed turns out to be the winner is periods when you see an upturn in interest rates. Sound familiar? We are entering such a period right now. Prime rate has already started to move higher and is likely to continue moving higher for now.

Be cautious when choosing the variable product. It’s not always a guaranteed winner. Additionally, if you are on a tight budget or you find a fantastic deal on a 5-year fixed it may be worth it for you to pay a little extra for the insurance of a fixed low 5 year rate.

Jul 28, 2010 — Not that there are a lot of people buying houses these days, but the answer to the age-old question of whether to go long or short on your mortgage is unclear yet again. The Bank of Canada’s second quarter of a point rate increase in the past two months is likely not going to do much to boost a real estate market that saw sales drop almost 20% across the country in June from a year ago.
Source: Garry Marr, Financial Post

http://www.financialpost.com/Variable+longer/3330179/story.html

Jul 26, 2010 — With mortgage rates low and more likely to go up than down, some borrowers may want to think long and hard about whether they want a long and hard, fixed, that is, mortgage rate.

Source: Fiona Anderson, Vancouver Sun

http://www.vancouversun.com/entertainment/With+interest+rates+time+reconsider+your+mortgage/3325562/story.html

Jul 25, 2010 — One of the biggest decisions many Canadian homeowners face is whether to choose a fixed or variable mortgage rate. In recent years, interest rates have been historically low, but the possibility of rate fluctuations causes many homeowners to question whether it’s best to lock in a fixed rate or to choose a variable rate. Here is some information about each option to help you make the right choice.

Source: Darren Sharko, Edmonton Sun

http://www.edmontonsun.com/homes/homesandcondos/2010/07/25/14823026.html

For those who have been waiting for rates to move higher before locking in their variable rate mortgages they may have gotten more than they bargained for today. Most people where expecting rates to rise slowly giving them time to lock in some low fixed rates but the 5 year rate moved 60 basis points today. The top 3 banks have all moved posted rates from 5.25% to 5.85%. Rate hikes are expected to continue. Prime rate is expected to increase between 75 and 100 (0.75 – 1.0%) basis points by the third quarter this year.  

If you are in a variable rate mortgage you should lock your rate as soon as possible if you do not want to be stuck with a continually growing mortgage rate. Additionally, if you are planning to buy or refinance in the next 6 months you may want to do it as quickly as possible while rates are still reasonably low. Keep in mind that while not all banks have moved their rates yet, it is standard for all banks and lenders to follow suit shortly after the first bank changes their rates.

This is what I found:

1. Tankless is a very efficient way to heat your homes hot water.
2. You get an endless supply of hot water.
3. You are able to run up to 2 appliances at one time before you lose heat. One appliance with the electric version.
4. You save floor space

The cost:

1. $30-$37 per month when leased on your gas bill.

Needless to say, the door to door company was the most expensive system that I found. While there are benefits to upgrading to tankless I chose to not upgrade. The reason is that I already have an energy star hot water heater. The cost savings from heating my water will not offset the increase leasing cost of a new system. If you are buying a new home construction you may want to go with the tankless system from the start. If you have an older hot water tank that is not energy star there is a good probability that the tankless system will save you money even though you pay more for the system than your current tank. If you already have a high efficiency energy star tank then you really have no need to upgrade you system.

Beware of the door to door sales team, they are not your friends, they are there to make money. When you book installations, purchases etc. give your self lots of time to do your research and make sure you are getting the deal that you have been told by the sales person.

 On March 5, 2010, CMHC communicated to Broker organizations and CMHC-approved Lenders how the “five-year fixed rate” requirement would be implemented.

 Effective April 19, 2010, the qualifying interest rate used to assess borrower eligibility will change only for loans with a loan to value ratio (LTV) greater than 80 per cent as follows:

 Fixed and Variable Rate Mortgages:

 For mortgages with a fixed rate term of less than 5 years and for all variable rate mortgages, regardless of the term, the qualifying interest rate is the greater of the “benchmark rate”, and the contract interest rate. For loans with a fixed rate term of 5 years or more, the qualifying interest rate is the contract interest rate.

 The “Benchmark rate” is the typical 5-year fixed posted rate of the Big 5 banks.  That is 5.39% currently.

 What this means for you:

 To start, if you are well qualified you will not be affected by any of this. For example, you are putting down more than 20%.

 If you are considering a purchase in the near future you need to sign your purchase and sale agreement prior to April 19 2010 to avoid the new rules.

 Pre-approvals are not a commitment to borrow funds and thus they will not protect you from the new rule after April 19 2010.

 If, however, you are getting pre-approved and your debt ratios are near the limits, it could mean that:

 a)  The higher qualifying rate after April 19 might reduce the mortgage amount you’ll qualify for (assuming you haven’t signed a purchase agreement before then); and,

 b)  You might potentially qualify for only a 5-year fixed term.

 If you have any questions or concerns feel free to contact me.

http://smrmortgage.com/calculator.htm

Run a test or two, if you have problems let me know…