With the media focusing on the interest rate hikes that are coming in the next few months, we have been receiving a bit of chatter and questions about locking in versus staying with a floating rate. Contrary to popular belief, now may be the BEST time to take a variable rate mortgage! Huh?
I once heard that Warren Buffett's key to success was investing when everyone else was selling and thens elling when everyone else is investing! The same may hold true for variable rate mortgages.
I took the liberty of running a few scenarios in which a client would take a traditional fixed rate mortgage at 4.59% for the next 5 years based on a mortgage of $250,000. The interest costs would be $53,590 over those 5 years and end up with a principle balance of $219,817.
Had that client took a variable rate at 1.85% (today based on Prime-0.40%) and kept the same payment as if they were paying the fixed rate, and assume that interest rates rose 1% for every year of that 5 year term, that client would save $11,340 in interest AND be $11,341 ahead on their balance!
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Thanks for reading!
Your London, Ontario Mortgage Brokers at Dominion Lending Centres Forest City Funding FSCO# 10671