Mortgage Renewal - WWBD?

[Kloubek]

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What people write: "Should I go fixed or variable"
What I read: "I'm really frightened of uncertainty, so it sure would be nice if someone could help me rationalize a costly decision that takes away that uncertainty."

If you were fully right, a variable wouldn't be an option and I'd go with the fixed every time as that also removes uncertainty. But you are partially right that I'm looking for further evidence to sway me in the direction with the most likely positive outcome.

Luckily, there have been very helpful individuals who have been willing to help.

You are not one of them.

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Variable is the correct answer.

If you don’t like that answer, go fixed.

It’s not rocket science

Of course those are my options. And no, it isn't rocket science but by saying that you're implying the answer on which to pick is either trivial or obvious - to which I would suggest it was neither to me. Why so salty?

Seeing the answers, and supported by further research of my own, I'll be going variable. Thank you to all who contributed.

We really DO have a lot of miserable mf'ers on here...

[holden]

Variable. Always and forever.

[pheoxs]

Yolo variable 4 lyfe. Or whatever.

I went variable this time around and don’t really see any downsides. Even if rates rise my monthly payment doesn’t change, all it does is extend out the amortization so figure why not risk it. The upside is pretty significant since I’m still sitting at 0.99% until rates creep up. By the time they do I’ll already be quite ahead and happy.

[cidley69]

https://www.truenorthmortgage.ca/mor...tment-mortgage

"'It’s an ideal fit for someone who’s sitting on the fence and can’t decide which kind of mortgage to get', according to Dan Eisner, True North Mortgage’s CEO."

[Buster]

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If you were fully right, a variable wouldn't be an option and I'd go with the fixed every time as that also removes uncertainty. But you are partially right that I'm looking for further evidence to sway me in the direction with the most likely positive outcome.

Luckily, there have been very helpful individuals who have been willing to help.

You are not one of them.



Of course those are my options. And no, it isn't rocket science but by saying that you're implying the answer on which to pick is either trivial or obvious - to which I would suggest it was neither to me. Why so salty?

Seeing the answers, and supported by further research of my own, I'll be going variable. Thank you to all who contributed.

We really DO have a lot of miserable mf'ers on here...

You are correct...both on the choice and that we have miserable motherfuckers.

[Disoblige]

The only time where it makes sense to go fixed is if you committed to a variable rate for X years and then the mortgage lender offers you a fixed rate shortly after that is BETTER than the whatever Prime-XX rate you had. I saw this happen during mid to late 2020 as they were scared you may jump ship to another lender and come out ahead even with penalties. Rare but it happens.

Otherwise agreed, variable.

[ThePenIsMightier]

Don't forget that it's an option to take much of the variable risk away by finding a lender with the option of a short penalty term if you change your mind and want to lock in.
I didn't know this was a thing until it was offered to us.

*Where "us" is me and my partner...

[Kloubek]

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Don't forget that it's an option to take much of the variable risk away by finding a lender with the option of a short penalty term if you change your mind and want to lock in.

Yeah, our RBC rep told us that was an option if we got concerned about rising rates. While it's unlikely we would be interested in doing that, it does provide an element of security in case we somehow happen to pull a 1981....

Again, I appreciate the comments from most. Not one person (if I read properly) recommended fixed. That says something by itself, imo.

[suntan]

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https://granthshala.com/finally-an-o...nd-no-strings/

Note that this is an ARM, not a VRM. Your payment will change based on interest rate changes.

[Buster]

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Yeah, our RBC rep told us that was an option if we got concerned about rising rates. While it's unlikely we would be interested in doing that, it does provide an element of security in case we somehow happen to pull a 1981....

Again, I appreciate the comments from most. Not one person (if I read properly) recommended fixed. That says something by itself, imo.

By the time you want to lock in against rising rates, the fixed rates will have moved already.

[nzwasp]

We were supposed to renew in June but ended up renewing yesterday for 2.59% for 5 years. We were previously on 2.44% and our lender gave us a discount on our penalty too.

[Kloubek]

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By the time you want to lock in against rising rates, the fixed rates will have moved already.

That's likely true. But absorbing a 5 point increase is a lot better than absorbing a 50 point increase. It just means I need to keep an eye on interest trends from time to time. No biggie.

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We were supposed to renew in June but ended up renewing yesterday for 2.59% for 5 years. We were previously on 2.44% and our lender gave us a discount on our penalty too.

First person I noticed that went fixed. That's a good rate though. Who did you go through?

The fact is as well that I have stellar credit, and my wife's is quite good too. We both have stable jobs paying 6 digits and have almost a half million of equity in the home. If anyone should get a good rate, I would imagine it should be us...

[Buster]

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That's likely true. But absorbing a 5 point increase is a lot better than absorbing a 50 point increase. It just means I need to keep an eye on interest trends from time to time. No biggie.

This is the assumption that people make that is incorrect. If interest rates go up, the fixed rates will already have risen past where you will want to be locked in. People are used to buying products, not participating in markets because people rarely encounter markets in their daily lives. If you get a mortgage you are being forced to participate in a market, with all of the fun that entails.

[ercchry]

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Yolo variable 4 lyfe. Or whatever.

I went variable this time around and don’t really see any downsides. Even if rates rise my monthly payment doesn’t change, all it does is extend out the amortization so figure why not risk it. The upside is pretty significant since I’m still sitting at 0.99% until rates creep up. By the time they do I’ll already be quite ahead and happy.

To note: most variable products are actually adjustable rates (very few are true variable)

While the above holds true for variable (to an extent) and this is what you want… make sure you quadruple check the commitment. If you see ARM instead of VRM. This is not what you’re signing.

ARM: maintains amortization schedule
VRM: maintains payment… BUT can have a payment adjustment if the rate rises high enough that the payment is less than the interest component of the mortgage… also can potential mean you’re paying your mortgage forever if you do not make additional payments towards principal

[ExtraSlow]

I recommend fixed only for people where a change in rates would introduce significant stress. People who could lose the house if rates rose, people recovering from bankruptcy who need stable payments, that kind of thing.

- - - Updated - - -

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To note: most variable products are actually adjustable rates (very few are true variable)

While the above holds true for variable (to an extent) and this is what you want… make sure you quadruple check the commitment. If you see ARM instead of VRM. This is not what you’re signing.

ARM: maintains amortization schedule
VRM: maintains payment… BUT can have a payment adjustment if the rate rises high enough that the payment is less than the interest component of the mortgage… also can potential mean you’re paying your mortgage forever if you do not make additional payments towards principal

Yes, this is agreat comment and worth people reading and understanding. I think most, and mine, are the kind where payment DOES CHANGE if rates rise.

[killramos]

You realize the banks have teams of people who have far more information than you do setting the fixed rates so that people like you pay more the vast majority of the time.

“Checking the rates from time to time” Isn’t good enough

[ercchry]

And on this episode of “lenders giving us a break”

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Don't forget that it's an option to take much of the variable risk away by finding a lender with the option of a short penalty term if you change your mind and want to lock in.
I didn't know this was a thing until it was offered to us.

*Where "us" is me and my partner...

Industry standard for variable/adjustable is 3 month interest penalties… fix rates are 3 months or the IRD… whichever is greater

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We were supposed to renew in June but ended up renewing yesterday for 2.59% for 5 years. We were previously on 2.44% and our lender gave us a discount on our penalty too.

So you resigned 6 months early, with the same lender… at a higher rate… and they didn’t COMPLETELY waive your penalty?? Hahaha… yes, gud deal

[Buster]

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I recommend fixed only for people where a change in rates would introduce significant stress. People who could lose the house if rates rose, people recovering from bankruptcy who need stable payments, that kind of thing.

If this is the case, then these people have bigger problems than fixed vs variable.

[ercchry]

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I recommend fixed only for people where a change in rates would introduce significant stress. People who could lose the house if rates rose, people recovering from bankruptcy who need stable payments, that kind of thing.

No one is losing their house if rates raise on a variable/adjustable… 3 month interest penalty can be absorbed into a straight transfer most of the time ($3k limit on increase before it’s considered a refi) and it’s super easy to move. Only catch here would be if it’s one of “those” situations where they feel strongly that they might not be able to prove enough income to qualify for the loan again, but also the bump to the less than ideal fixed rate the current lender offers would tip them over the edge.

Depending on the equity and other debt obligations this could actually enhance their situation too if they take the time to refi (rates are not as good though as a straight transfer)


The banko folks don’t need to worry… the only variable’s they’re likely to even qualify for are P+X% HELOC/secured credit cards

[suntan]

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To note: most variable products are actually adjustable rates (very few are true variable)

While the above holds true for variable (to an extent) and this is what you want… make sure you quadruple check the commitment. If you see ARM instead of VRM. This is not what you’re signing.

ARM: maintains amortization schedule
VRM: maintains payment… BUT can have a payment adjustment if the rate rises high enough that the payment is less than the interest component of the mortgage… also can potential mean you’re paying your mortgage forever if you do not make additional payments towards principal

Really? Every VRM I had was a VRM. Payment stayed the same within a fairly large interest increase, increases past that threshold would cause the payment to go up. It was actually based on how much additional interest the increase would create.

And guys, if you go for the variable rate, it's extremely rare that even with prime rate increases that your rate would end up above any term equivalent fixed mortgages then being offered. Fixed rates are made for wives to feel good.