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[BMO] BMO 10 year fixed term mortgage at 5 year rate 3.49%

  • Last Updated:
  • Nov 27th, 2017 5:07 pm
Sr. Member
User avatar
Aug 9, 2007
820 posts
221 upvotes
smacd wrote:
Nov 20th, 2017 4:19 pm
How long is your experience? Certainly in the past 20 years, mortgages have been on a downward trend, thus having a variable rate has paid. If mortgages go on an upward trend, it's better to lock in. My first mortgage was in 1989 and I've seen it both ways.
I'd be around the 20 year mark since my first mort. Part of my statement is also using my uncles advice as he watches these things carefully, and probably has another 10y on me.
On the upward trends the banks will also attempt to average that out so they aren't making less as well. The way I see it, is if you need the security of having a consistent mortgage amount every month, then go fixed, and pay the extra cost for that peace of mind. I prefer to attempt to take the cheapest route in the long term, as the fluctuation won't make or break me.
Once again, just an amateur investor/owner speaking though.
Deal Addict
User avatar
Jan 23, 2006
1652 posts
496 upvotes
There are some misleading comments in this thread, so I thought I'd clear it up. For those who wonder, after the 5th year of the mortgage term, banks can only charge 3 months of interest, and NOT the IRD.

In other words, whether you break your mortgage after 5 years, 7 years or 9 years, you will still pay 3 months interest only.

If you break before the 5th year though, you still have to pay the IRD (which might end up being quite a lot). Keep in mind that you can transfer the mortgage to a new home if you sell the old without penalty.

So I guess if you are pretty certain you will have a mortgage for at least 5 years with high probability you will have it for anything close to 10, I'd say this is not bad.
iamalittlepepper wrote:
Aug 13th, 2012 2:55 am
Non of the Royal Purple is BMW qualified which voids your drivetrain warranty.. especially for those who owns the 3.0L N54 engine
tcjsqls wrote:
Jan 13th, 2015 12:56 pm
you have no ideas how a report of stolen credit card (...) affect your credit. Happened twice in your history, that bank won't issue a credit card for you
Deal Addict
User avatar
May 19, 2005
3316 posts
388 upvotes
Markham
The banks have teams of people making these calculations before offering them. They will not lose money on this.

Other things to consider. Your mortgage amount is front heavy, menaing you will pay more interest up front juts because it’s a larger amount. If the interest rates goes up later, you actually have a smaller amount of mortgage to finance so it not a straight calculation of the average mortgage rate being higher than 3.5% to benefit. It might have to to be 4% or 5%, and that’s average. That means you’ll really only benefit in the long run if it hits 6% or higher.

All that said, there is value in knowing you can afford your house for 10 years no matter which direction the interest rates go.

So like everyone is saying, it depends on your tolerance for risk. It’s not llikely you will save money in the long run. So only do this if you want to reduce risk, not to reduce average cost.

EDIT: those % are made up for illustration, actual amount could be higher or lower. I’m too lazy to do the math but there are probably apps for that or you can build a spreadsheet to analyse this
Some people just don't get that online forum posts shouldn't always be taken seriously.
Newbie
Jul 30, 2015
9 posts
2 upvotes
Toronto, ON
most likely rates will be going up and if you can afford payments at the current rates then i see no harm in locking it. its not like we're at 5% where if rates do drop then they would not drop substantially, not much room on the downside. Just my opinion, everyone's situation is different.
Deal Addict
Apr 4, 2007
3053 posts
674 upvotes
Montreal
Mufasa69 wrote:
Nov 21st, 2017 11:37 am
most likely rates will be going up and if you can afford payments at the current rates then i see no harm in locking it. its not like we're at 5% where if rates do drop then they would not drop substantially, not much room on the downside. Just my opinion, everyone's situation is different.
Everyone's objective is to pay as little interest as possible. The "harm" is in potentially paying more than with other options, which has been pretty well explaining in previous posts. The only reason to lock yourself in is if a) you want to eliminate anxiety over interest rate hikes or b) you are convinced rates will continue going up, have done the math, and this will save money.
Newbie
Oct 23, 2017
59 posts
14 upvotes
Burlington ON
Many people commenting on this offer have only experienced a low-rate environment and can not imagine the 8 - 10% mortgages which were once the norm. I went through a period where rates soared to 20%, and people just gave their house keys to the bank! I remember seeing long term high quality bonds at 8% and passing on them because it did not seem like a great rate at the time.

It is impossible to time the market, but the general sentiment seems to be that rates have nowhere to go but up. 3.49% is roughly 1.25% above the recent historical low, but consider how far below the historical high this is! The chart at the following link will give you some perspective:

https://www.ratehub.ca/5-year-fixed-mor ... te-history

So I think 3.49% is VERY tempting if you expect to be paying a mortgage for 10 years, especially if you can get even a small annual prepayment privilege with it. If you have the resources to pay down the mortage if rates rise, then it would probably be best to stay with a shorter term.
Jr. Member
Apr 28, 2014
164 posts
54 upvotes
Waterloo, ON
My disclaimer is that I am an idiot who has for the past ten years been increasingly convinced that rates have to, simply must go up, and has accordingly paid more in interest charges with fixed mortgages than was necessary. People who read Moshe Milevski's conclusive findings that, historically, variable is the way to go, and acted accordingly, did much better than I did.

That having been said, rates really do have to rise but, more to the point, most Canadians have a fixed mortgage anyway. If you're torn between whether to go fixed or variable or what, this is cheap insurance for years five through ten, since you'll be able to break the mortgage regardless (as others have pointed out) after year five.

If I had a mortgage term ending soon, I'd consider this (but see disclaimer at top).
Sr. Member
User avatar
Oct 22, 2012
529 posts
323 upvotes
Interesting 10 years mortgage rate. I wonder what the effect on interests rates here in Canada once NAFTA has been cancelled.
Deal Addict
Apr 4, 2007
3053 posts
674 upvotes
Montreal
FlukeSkywalker wrote:
Nov 27th, 2017 11:32 am
Interesting 10 years mortgage rate. I wonder what the effect on interests rates here in Canada once NAFTA has been cancelled.
Well if you're able to head into the future and know for sure that NAFTA will be cancelled, why don't you look around while you're there to see what future interest rates are?

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