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Locking Mortgage Rates in my take

Tim Blake

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Locking mortgage in may make sense now !

I have typically mostly went variable as rates usually lower. But just now locked in a 5yr fixed on several properties at several different banks.

Always ask for discounts after they initially quote you rates. They usually come down

If you are like me and value cash flow (to reinvest ) over mortgage paydown ask to bump amortization back to original when you got mortgage


Example
When you bought your amortization was 25 and your 7 years in so current amortization is now 18 yr bump it back to 25 and you have lower payments better cashflow to reinvest
Even if you like to aggressively pay your mortgage down take the extra cashflow and make lump sum. Lower payments help you qualify for more .

Some not all banks offer this option lots of bankers won't be aware of this option but can offer it without any re-qualifying hoops at time of signing a new term .

At one time ( I think still do ) CIBC also offered cashback mortgages even on renewals. Yes you pay a higher rate but at the time the cashback more than paid for the higher rate . Do the math !

Example
Cashback was $4000 and you would pay $3000 more in interest over the term so $1000 free money . I went through it in detail with banker as seemed to good to be true but was legit and I did several mortgages this way . The banker justified it as they like long term higher interest loans in portfolio so willing to over pay on cashback?? ...
Can either take the $ and reinvest / upgrade property or pay it directly on mortgage or buy a quad (don't buy a quad with it haha)

One thing to be aware though the higher your mortgage payment is harder it is to be approved for the next one . That is also one more reason to bump amortization back up in earlier example to qualify for other mortgages.
 

Matt Crowley

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Locking mortgage in may make sense now !
Example
Cashback was $4000 and you would pay $3000 more in interest over the term so $1000 free money . I went through it in detail with banker as seemed to good to be true but was legit and I did several mortgages this way . The banker justified it as they like long term higher interest loans in portfolio so willing to over pay on cashback?? ...

The math isn't right though... it isn't free money. The cash back gets added back to the mortgage so you still have to pay it back.

There is virtually no cash flow from multifamily / residential properties to reinvest if there is leverage - but I hear you. The modern residential investment property is more like a substitute for a fixed income investment than for a dividend stock.

Right now in the Canadian investment cycle I am thinking "DEFENSE". Teranet is down for 6 consecutive months for the first time in the indexes' history. We are looking mighty recession-like.

https://housepriceindex.ca/2019/04/march2019/
 

Tim Blake

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The math isn't right though... it isn't free money. The cash back gets added back to the mortgage so you still have to pay it back.

That was my first though as well cashback gets added back but NOT the case did with the CIBC ones (maybe others do )

I did 3 one year and 3 more a year later . Cashback isn't added to mortgage or due back (unless you break term early then prorated)
As mentioned above you pay higher interest over the term but I averaged about $1000 to the good per mortgage after accounting for higher interest over the term . Really was FREE money!
 

Edison Reis

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I just renewed mine with a 5 year term but variable rate ...... variable rates have shown benefits in the last 50 years ....I trust history and stats


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kfort

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At even up % wise there’s still the benefit of flexibility and much lower discharge penalty for variable.

Counter:

At even up % wise there’s the added security with fixed.

Personally, I still see it as a 2:1 advantage for variable. Cripes at $30B deficit lately this country can’t afford anything but cheap borrowing. We’re addicted now, and there is no methadone for this dumb-assery


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Thomas Beyer

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ALL GofC bond rates sub 2%, incl 10 year and 30 year rates. Mortgage rates won’t go up much, if at all, likely slightly down even.


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bizaro86

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In your example, you got $4000 cash back and paid $3000 extra interest over 5 years. But at the end of the 5 years your mortgage is now ~$4000 higher. The total cost is at least $7000, maybe more if you keep holding, because now you're paying interest on the money in the second term as well.

If you think someone is giving you free money, I predict you don't understand the deal...
 

Tim Blake

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IMG_2870.jpgIMG_2871.jpg

It was free money !

Have a look at the mortgage statements in 2016 before the cashback then 2017 after the cash back.
Notice balance has went down in 2017
It really was a cashback that didn’t get paid back. Was skeptical of free money also and went over it with banker several times to insure it was legit.

Also notice the cash back received on the right side of 2017 statement.
I have half a dozen other statements for other properties showing the same thing.
Not sure if they still offer but may want to look into it

Cheers



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Last edited:

XavierCP

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back mortgages even
Locking mortgage in may make sense now !

I have typically mostly went variable as rates usually lower. But just now locked in a 5yr fixed on several properties at several different banks.

Hey Tim, if you calculate all your expenses before buying a rental property so you are sure to have a positive cash-flow property, isn't risky to use a variable interest mortgage rate? I mean, if you really want to see cash coming into your bank account every month and not being worry if the market move up and down, isn't imperative to get a fixed-rate mortgage?

Also, having a portfolio of positive cash-flow properties also makes it much easier to get financing for future investment properties.
 

Tim Blake

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back mortgages even
Locking mortgage in may make sense now !

I have typically mostly went variable as rates usually lower. But just now locked in a 5yr fixed on several properties at several different banks.

Hey Tim, if you calculate all your expenses before buying a rental property so you are sure to have a positive cash-flow property, isn't risky to use a variable interest mortgage rate? I mean, if you really want to see cash coming into your bank account every month and not being worry if the market move up and down, isn't imperative to get a fixed-rate mortgage?

Also, having a portfolio of positive cash-flow properties also makes it much easier to get financing for future investment properties.

You typically pay a much higher interest rate to lock in then available on variable . I have always looked at it as your going to save $ on the first while for sure maybe a couple rate bumps may happen during the term ( or may not) but then you will be up to the rate your would have been locked into anyway .

Historically variable has also performed much better than fixed terms.

If your the type ( I am not) that will loose sleep knowing rates / payments could increase then lock in

Nice thing about variable is only 3 months interest to cancel as well. ( if your may sell)

But just recently I had existing variables that I could now lock into a 5 yr on at a lower rates than was currently on the variable and since not selling those ones I took it.


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XavierCP

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You typically pay a much higher interest rate to lock in then available on variable . I have always looked at it as your going to save $ on the first while for sure maybe a couple rate bumps may happen during the term ( or may not) but then you will be up to the rate your would have been locked into anyway .

Historically variable has also performed much better than fixed terms.

If your the type ( I am not) that will loose sleep knowing rates / payments could increase then lock in

Nice thing about variable is only 3 months interest to cancel as well. ( if your may sell)

But just recently I had existing variables that I could now lock into a 5 yr on at a lower rates than was currently on the variable and since not selling those ones I took it.


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Thank you Tim for taking the time to answer me, I appreciate your infos!
 
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