The Advantages of 5-Year Fixed Mortgage Rates
This fall, interest rates on mortgages reached an all-time low. Since 2008, where rates peaked at 5.89%, they dropped this November to an average of 2.09%. But in the wake of the federal Liberals’ tightening of mortgage rules, the rates are already on the rise. Currently, 5-year fixed rates stand at about 2.43%—still reasonably low compared to the past eight years. So if you’re considering investing in income property in Montreal, right now is the ideal time. You may be torn between a five-year fixed and a shorter term or variable rate. Here’s why a 5-year fixed rate is highly recommended: Grab it before it soars. Experts predict variable mortgage rates will keep steadily rising in the next few years. In fact, it is possible mortgage rates will reach 3% or 4%; therefore, buyers are strongly urged to lock in fixed-rates while they’re down. Pay with less risk. Variable mortgage rates can—and likely will—vary during the mortgage term. This means that you won’t have the security of knowing exactly how much your monthly payments will be. Budget better. Locking in a five-year rate leaves a lot more breathing room in terms of budgeting. Since you won’t have to live with the fear of interest rates fluctuating from year-to-year, you can budget yourself according to your fixed rate, and calculate maximizing your savings in order to pay your mortgage off faster. Some lenders usually allow prepayment privileges as high as 10% annually—a great way to shed years off your amortization period. If you choose to go with a variable rate, there’s no telling what the subsequent year will bring—you may need to use your savings to go towards the increased monthly interest instead. It is always recommended to consult a professional mortgage broker to go over all your options. At Baron Realty, we will ensure that you are making the financial decision that is right for you and will help you achieve your real-estate goals. For more information about our brokerage services from income property owners across Montreal, contact us today.